SUPPLEMENT DATED NOVEMBER 30, 2016 PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 17, 2016 RELATING TO

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1 SUPPLEMENT DATED NOVEMBER 30, 2016 TO PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 17, 2016 RELATING TO ALABAMA ECONOMIC SETTLEMENT AUTHORITY $110,445,000* BP Settlement Revenue Bonds Series 2016-A $541,880,000* Taxable BP Settlement Revenue Bonds Series 2016-B The Preliminary Official Statement dated November 17, 2016, with respect to the above-referenced Bonds (the Preliminary Official Statement ), provides that the State Treasurer may cause any money on deposit in the Debt Service Fund, the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund referred to therein (i) to be invested in Permitted Investments or (ii) maintained in an interest bearing deposit account with a depository bank designated by the State Treasurer. The Preliminary Official Statement is hereby supplemented to provide that the State Treasurer shall cause any money on deposit in the Debt Service Fund, the Series 2016-A Capitalized Interest Fund and Series 2016-B Capitalized Interest Fund to be maintained, pending its expenditure, in interest bearing deposit accounts with banks or savings associations participating in the SAFE Program established under the Code of Alabama 1975, as amended, Sections 41-14A-1 through 41-14A-14. Under the SAFE Program, all public funds held by participating financial institutions are protected through a collateral pool administered by the State Treasurer s office. Under this program, financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that financial institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Deposit Insurance Corporation. If the securities pledged failed to produce adequate funds, every institution participating in the pool would share the liability for the remaining balance. The Bond Resolution, the form of which is attached as Appendix A to the Preliminary Official Statement, will be revised prior to adoption to reflect the changes described above. Any terms capitalized in this Supplement but not otherwise defined herein shall have the meanings ascribed to them in the Preliminary Official Statement. The Preliminary Official Statement, as supplemented by this Supplement, hereby constitutes the preliminary official statement with respect to the Bonds, and shall be read, taken and construed as one preliminary official statement. Morgan Stanley Loop Capital Markets * Preliminary, subject to change. Raymond James Stifel, Nicolaus & Company, Incorporated The Frazer Lanier Company, Incorporated

2 THIS PRELIMINARY OFFICIAL STATEMENT has been deemed final within the meaning of and with the exception of certain information permitted to be omitted by Rule 15c212 of the Securities and Exchange Commission, and the information contained herein is subject to completion and amendment in accordance with applicable law. The issuer of the securities will deliver a final Official Statement in accordance with Rule 15c212. The securities herein described may not be sold nor any offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. New Issue Book-Entry Only PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 17, 2016 RATINGS: Moody s: A2 (positive outlook) Standard & Poor s: A- (stable outlook) (See RATINGS herein) In the opinion of Bond Counsel, under existing law interest on the Series 2016-A Bonds (i) will be excluded from gross income for federal income tax purposes if the Authority complies with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Series 2016-A Bonds in order that interest thereon be and remain excludable from gross income, and (ii) will not be an item of tax preference for purposes of the federal alternative minimum tax on individuals and corporations. Bond Counsel is also of the opinion that, under existing law, interest on the Series 2016-A Bonds and the Series 2016-B Bonds will be exempt from State of Alabama income taxation. Interest on the Series 2016-B Bonds is not excluded from gross income for federal income tax purposes. See Tax Matters herein. Dated: Date of Delivery $110,445,000* BP Settlement Revenue Bonds Series 2016-A Alabama Economic Settlement Authority $541,880,000* Taxable BP Settlement Revenue Bonds Series 2016-B Due: September 15, as shown on inside front cover page The Alabama Economic Settlement Authority (the Authority ) is a public corporation and instrumentality of the State of Alabama (the State ) established pursuant to Act No adopted during the 2016 First Special Session of the Alabama Legislature (the Enabling Law ). The Authority is issuing its BP Settlement Revenue Bonds, Series 2016-A (the Series 2016-A Bonds ) and its Taxable BP Settlement Revenue Bonds, Series 2016-B (the Series 2016-B Bonds, and together with the Series 2016-A Bonds, the Series 2016 Bonds ), pursuant to a Bond Resolution (the Bond Resolution ) adopted by the governing body of the Authority and under the Enabling Law. The Treasurer of the State of Alabama (the State Treasurer ) has been appointed pursuant to the Bond Resolution to serve as the paying agent for the Series 2016 Bonds. The proceeds of the Series 2016-A Bonds will be used to finance certain transportation projects, to capitalize a portion of the interest payable on the Series 2016-A Bonds, and to pay the costs of issuance of the Series 2016-A Bonds. The proceeds of the Series 2016-B Bonds will be used to reimburse certain amounts previously withdrawn from the General Fund Rainy Day Account, to reimburse certain amounts previously withdrawn from the Alabama Trust Fund, to provide funds to the Alabama Medicaid Agency during fiscal year 2017 and fiscal year 2018, to capitalize a portion of the interest payable on the Series 2016-B Bonds, and to pay the costs of issuance of the Series 2016-B Bonds, as more particularly described herein. The Series 2016 Bonds are subject to redemption prior to maturity as described herein. The State is party to an agreement entered into on October 5, 2015 (the Settlement Agreement ) among the State, Florida, Louisiana, Mississippi, and Texas (collectively, the Gulf States ) and BP p.l.c., a company incorporated in England ( BP p.l.c. ), BP Corporation North America Inc., an Indiana corporation ( BPCNA ), and BP Exploration & Production Inc., a Delaware corporation ( BPXP ) in connection with the settlement of economic damages claims of the Gulf States against BP p.l.c, BPCNA, BPXP, and any parents, subsidiaries, successors, assigns and various other related entities thereof arising out of the Deepwater Horizon oil spill in the Gulf of Mexico. The State is entitled to certain annual settlement payments pursuant to the terms of the Settlement Agreement (such payments, the BP Settlement Revenues ) as more particularly described herein. The Enabling Law establishes a special fund (the BP Settlement Fund ) into which BP Settlement Revenues are to be deposited. The Authority has irrevocably pledged and appropriated the amounts on deposit in the BP Settlement Fund, less and except amounts paid under the Settlement Agreement during calendar years 2016 and 2017, to the payment of debt service on the Series 2016 Bonds. See SECURITY Funds and Accounts herein. The Series 2016 Bonds shall be limited obligations of the Authority secured by and payable solely from the Pledged Funds, which consist of (i) all right, title and interest of the Authority in and to the BP Settlement Revenues deposited in the BP Settlement Fund and any investment earning thereon, and (ii) amounts held in a debt service fund maintained under the Bond Resolution. Amounts deposited into the BP Settlement Fund not needed for payment of debt service may be withdrawn by the Authority and used for other purposes as specified under the Enabling Law. The Series 2016 Bonds will not be general obligations of the Authority. The Series 2016 Bonds shall never be deemed a general obligation of the Authority and do not constitute or give rise to an indebtedness or a pecuniary liability of, and do not constitute a charge against the general credit or taxing powers of, the State. The Authority has no taxing power. Payment of the Series 2016 Bonds is dependent on receipt of BP Settlement Revenues, which payments are to be made by BPXP and are guaranteed by BPCNA and BP p.l.c as more particularly described herein. See The Settlement Agreement and Guaranty Agreements herein. Although the Settlement Agreement payments to the State are guaranteed by BPCNA and BP p.l.c., the Series 2016 Bonds are not guaranteed by BPCNA, BP p.l.c. or any other BP entities (hereafter defined). The amount of BP Settlement Revenues actually collected and thus available for payment of debt service is solely dependent on the financial performance of BPXP, BPCNA and BP p.l.c. See Risk Factors for a discussion of certain factors that should be considered in connection with an investment in the Series 2016 Bonds. Any determination in any case of litigation that the Settlement Agreement, either of the aforesaid guarantees from BPCNA or BP p.l.c., or state legislation enacted pursuant to the Settlement Agreement is void or unenforceable could have a materially adverse effect on the payments by the BPCNA, BPXP, or BP p.l.c (together, the BP Settlement Agreement Parties ) under the Settlement Agreement and/or the said guarantees and the amount or the timing of the BP Settlement Revenues actually collected. See Risk Factors and Legal Considerations herein. See Inside Front Cover for Maturities, Principal Amounts, Interest Rates, Prices or Yields, and CUSIPs The Series 2016 Bonds are offered when, as and if issued by the Authority, subject to the approval of legality by Balch & Bingham LLP, Birmingham, Alabama, as Bond Counsel. Certain legal matters will be passed upon for the Authority by Butler Snow LLP, Birmingham, Alabama, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriters by Bradley Arant Boult Cummings LLP, Birmingham, Alabama, counsel to the Underwriters. It is expected that the Series 2016 Bonds will be available for delivery in book-entry form only through The Depository Trust Company on December, Morgan Stanley Raymond James Loop Capital Markets Stifel, Nicolaus & Company, The Frazer Lanier Company, Incorporated Incorporated, 2016 * Preliminary, subject to change.

3 $110,445,000 * ALABAMA ECONOMIC SETTLEMENT AUTHORITY BP Settlement Revenue Bonds Series 2016-A MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES OR YIELDS, AND CUSIPS Dated: Date of issuance Due: September 15, as shown below Year Principal Amount* Interest Rate Price or Yield CUSIP 2031 $ 7,925, ,235, ,285,000 * Preliminary, subject to change. Copyright 2016, American Bankers Association. CUSIP data herein are provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. All rights reserved. The CUSIP numbers listed above are being provided only for the convenience of the reader and neither the Authority nor the Underwriters make any representation with respect to such numbers or undertakes any responsibility for their accuracy now or at any time in the future. Any CUSIP number may change after the issuance of the Series 2016-A Bonds as a result of subsequent events, including the procurement of secondary market portfolio insurance or other similar enhancement that is applicable to all or certain portions of the Series 2016-A Bonds.

4 $541,880,000 * ALABAMA ECONOMIC SETTLEMENT AUTHORITY Taxable BP Settlement Revenue Bonds Series 2016-B MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES OR YIELDS, AND CUSIPS Dated: Date of issuance Due: September 15, as shown below Year Principal Amount* Interest Rate Price or Yield CUSIP 2018 $30,005, ,865, ,520, ,270, ,135, ,110, ,160, ,295, ,535, ,870, ,320, ,875, ,535, ,385,000 * Preliminary, subject to change. Copyright 2016, American Bankers Association. CUSIP data herein are provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. All rights reserved. The CUSIP numbers listed above are being provided only for the convenience of the reader and neither the Authority nor the Underwriters make any representation with respect to such numbers or undertakes any responsibility for their accuracy now or at any time in the future. Any CUSIP number may change after the issuance of the Series 2016-B Bonds as a result of subsequent events, including the procurement of secondary market portfolio insurance or other similar enhancement that is applicable to all or certain portions of the Series 2016-B Bonds.

5 Alabama Economic Settlement Authority Robert J. Bentley Governor of the State of Alabama Young Boozer Treasurer of the State of Alabama Mac McCutcheon Speaker of the House of Representatives of the State of Alabama Del Marsh President Pro Tempore of the Senate of the State of Alabama Fitzgerald Washington Secretary of Labor of the State of Alabama Clinton P. Carter Director of Finance of the State of Alabama Paying Agent State Treasurer Montgomery, Alabama Financial Advisor Rice Advisory, LLC Montgomery, Alabama Bond Counsel Balch & Bingham LLP Birmingham, Alabama Disclosure Counsel Butler Snow LLP Birmingham, Alabama

6 This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or holders of the Series 2016 Bonds. The Series 2016 Bonds have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and neither the Securities and Exchange Commission nor any state regulatory agency will pass upon the accuracy, completeness or adequacy of this Official Statement. The Bond Resolution has not been qualified under the Trust Indenture Act of 1939, as amended. THE UNDERWRITERS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE OR MAINTAIN THE PRICE OF THE SERIES 2016 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET, OR OTHERWISE AFFECT THE PRICE OF THE SERIES 2016 BONDS OFFERED HEREBY, INCLUDING OVER-ALLOTMENT AND STABILIZING TRANSACTIONS. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NO DEALER, BROKER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE AUTHORITY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERYE HAS BEEN NO CHANGE IN THE MATTERS DESCRIBED HEREIN SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SERIES 2016 BONDS OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THERE CAN BE NO ASSURANCE THAT A SECONDARY MARKET FOR THE SERIES 2016 BONDS WILL DEVELOP OR, IF ONE DEVELOPS, THAT IT WILL CONTINUE FOR THE LIFE OF THE SERIES 2016 BONDS. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. The information set forth herein has been furnished by the Authority and includes information obtained from other sources, all of which are believed to be reliable. Information concerning the oil and gas industry and participants therein has been obtained from certain publicly available information provided by certain of the participants and certain other sources. The participants in such industry have not provided any information to the Authority for use in connection with this offering. In certain cases, industry information provided herein (such as market share data) may be derived from sources which are inconsistent or in conflict with each other. In such instances, the Authority has made its best judgment as to the proper presentation of the applicable facts, but the Authority cannot provide any guarantees as to the accuracy thereof. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof or that the information contained herein is correct as of any date subsequent to the date hereof. Such information and expressions of opinion are made for the purpose of providing information to prospective investors and are not to be used for any other purpose or relied on by any other party. See CONTINUING DISCLOSURE UNDERTAKING. This Official Statement contains payments due under the Settlement Agreement that are based on current expectations or assumptions. In light of the important factors that may materially affect the amount of BP Settlement Revenues (see RISK FACTORS and THE SETTLEMENT AGREEMENT AND GUARANTY AGREEMENTS herein), the inclusion in this Official Statement of such amounts should not be regarded as a representation by the Authority or

7 the Underwriters that such payments will actually be made. Such information is not intended as representations of fact or guarantees of results. For a discussion of certain risk factors involved in an investment in the Series 2016 Bonds, see RISK FACTORS. THE SERIES 2016 BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAS ANY OF THE FOREGOING PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

8 TABLE OF CONTENTS SUMMARY STATEMENT... S-1 INTRODUCTORY STATEMENT... 1 THE SERIES 2016 BONDS... 2 Date, Form of Series 2016 Bonds and Denominations... 2 Book Entry System... 2 Calculation of Interest Payments... 2 Optional Redemption... 2 Scheduled Mandatory Redemption... 3 Selection of Series 2016 Bonds for Redemption... 4 THE FINANCING PLAN... 4 General... 4 Sources and Uses of Funds... 4 Debt Service Requirements on Series 2016 Bonds... 5 SECURITY... 6 BP Settlement Revenues... 6 Funds and Accounts... 6 Funds Held by State Treasurer... 9 Additional Bonds... 9 Events of Default and Remedies... 9 Covenants with Respect to Appropriated Funds and the Settlement Agreement ESTIMATED DEBT SERVICE REQUIREMENTS AND SCHEDULE OF BP SETTLEMENT PAYMENTS THE SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS The Settlement Agreement The Guaranty Agreements RISK FACTORS Risks Relating to the BP Settlement Agreement Parties Other Risks Relating to the Settlement Agreement and Related Statutes Bankruptcy of BP Settlement Agreement Parties May Delay, Reduce, or Eliminate Payments of Pledged Funds Series 2016 Bonds Secured Solely by the Pledged Funds Nature of the Ratings of the Series 2016 Bonds; Reduction, Suspension or Withdrawal of a Rating Authority s Immunity from Suits to Enforce Payment of Bonds and Other Obligations Tax-Exempt Status of Series 2016-A Bonds LEGAL CONSIDERATIONS Bankruptcy Considerations Enforcement of Rights to BP Settlement Revenues FORWARD-LOOKING STATEMENTS THE AUTHORITY CONTINUING DISCLOSURE UNDERTAKING General... 19

9 LITIGATION TAX MATTERS Series 2016-A Bonds Series 2016-B Bonds RATINGS UNDERWRITING FINANCIAL ADVISOR LEGAL MATTERS AUTHORIZATION AND APPROVAL APPENDIX A FORM OF BOND RESOLUTION APPENDIX B SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX D THE DTC BOOK-ENTRY ONLY SYSTEM APPENDIX E EXCERPTS FROM BP P.L.C. DECEMBER 31, 2015 ANNUAL REPORT

10 SUMMARY STATEMENT This Summary Statement is subject in all respects to more complete information contained in this Official Statement and should not be considered a complete statement of the facts material to making an investment decision. The offering of the Series 2016 Bonds to potential investors is made only by means of the entire Official Statement Any capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Bond Resolution. See FORM OF BOND RESOLUTION in APPENDIX A attached hereto. The Authority and the Series 2016 The Authority was established on September 9, 2016, as a public corporation Bonds... and instrumentality of the State pursuant to Act No adopted during the 2016 First Special Session of the Alabama legislature (the Enabling Law ). The Authority is issuing $110,445,000 * aggregate principal amount of its BP Settlement Revenue Bonds, Series 2016-A (the Series 2016-A Bonds ) and $541,880,000* aggregate principal amount of its Taxable BP Settlement Revenue Bonds, Series 2016-B (the Series B Bonds, and together with the Series 2016-A Bonds, the Series 2016 Bonds ) under the Enabling Law and pursuant to a Bond Resolution adopted by the governing body of the Authority (the Bond Resolution ). The Series 2016 Bonds will mature on the dates and in the principal amounts, and will bear interest, as set forth in the inside cover page hereof. Interest will be payable on each March 15 and September 15, commencing March 15, The proceeds of the Series 2016-A Bonds will be used to finance certain transportation projects, to capitalize a portion of the interest payable on the Series 2016-A Bonds and to pay the costs of issuance of the Series 2016-A Bonds. The proceeds of the Series 2016-B Bonds will be used to reimburse certain amounts previously withdrawn from the General Fund Rainy Day Account, to reimburse certain amounts previously withdrawn from the Alabama Trust Fund, to provide funds to the Alabama Medicaid Agency during fiscal year 2017 and fiscal year 2018, to capitalize a portion of the interest payable on the Series 2016-B Bonds and to pay the costs of issuance of the Series 2016-B Bonds. See THE FINANCING PLAN herein. Settlement Agreement... The State is party to an agreement entered into on October 5, 2015 (the Settlement Agreement ) among the State, Florida, Louisiana, Mississippi, and Texas (such states, the Gulf States ) and BP p.l.c., a company incorporated in England ( BP p.l.c. ), BP Corporation North America Inc., an Indiana corporation ( BPCNA ), and BP Exploration & Production Inc., a Delaware corporation ( BPXP, and together with BPCNA and BP p.l.c., the BP Settlement Agreement Parties ). The Settlement Agreement became effective upon entry of a Consent Decree and Final Judgment in the United States District Court for the Eastern District of Louisiana on April 4, The Settlement Agreement resolved numerous claims against the BP Settlement Agreement Parties, and any parents, subsidiaries, successors and related entities thereof (collectively, the BP Entities ) arising from or otherwise relating to the blow-out, explosion and fire that occurred aboard the mobile offshore drilling unit Deepwater Horizon on April 20, 2010, and the subsequent release of oil and other substances into the Gulf of Mexico. The Authority is not a party to the Settlement Agreement, and only the State can enforce its rights thereunder. A copy of the Settlement Agreement and each of the Guaranty Agreements (hereinafter defined) is attached as APPENDIX B hereto. Under the Settlement Agreement, BPXP is required to pay, on an annual basis, set amounts to each of the State, Florida, Louisiana, Mississippi, and * Preliminary, subject to change. S-1

11 Texas, as more particularly outlined in Attachment I to the Settlement Agreement. See SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS in APPENDIX B attached hereto. Payments to the State by BPXP are primarily guaranteed by BPCNA and secondarily guaranteed by BP p.l.c. See THE SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS herein. Although the Settlement Agreement payments to the State are guaranteed by BPCNA and BP p.l.c., the Series 2016 Bonds are not guaranteed by BPCNA, BP p.l.c. or any other BP entities. Payments to Alabama Pursuant to Under the Settlement Agreement, BPXP is required to pay the State annual the Settlement Agreement... payments on each April 4 through April 4, 2033, in the following amounts: Year Payments to Alabama 2016 * $100,000, ,000, ,000, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333,338 Such revenues received by the State under the Settlement Agreement as aforesaid, and amounts received under the guarantees executed in connection therewith by BPCNA and BP, are referred to herein and in the Bond Resolution as the BP Settlement Revenues. Application of BP Settlement The Enabling Law requires that all BP Settlement Revenues be deposited in Revenues... a special fund (the BP Settlement Fund ) upon receipt by the State. The Enabling Law includes the irrevocable pledge and appropriation of the amount of BP Settlement Revenues on deposit in the BP Settlement Fund which is required for the payment of debt service on the Series 2016 Bonds and any Additional Bonds hereafter issued, in any fiscal year. Specifically, the Enabling Law requires that amounts in the BP Settlement Fund be applied first for payment of debt service on the Series 2016 Bonds, but permits the withdrawal and use of any such amounts that the governing body of the Authority determines to be in excess of amounts needed for payment of debt service on the Series 2016 Bonds and any Additional Bonds hereafter issued for other purposes specified in the Enabling Law. See SECURITY BP Settlement Revenues herein. Under the Bond Resolution, debt service payments scheduled for March 15, 2017, through March 15, 2018, will be secured by and payable from amounts in the Series 2016-A Capitalized * BPXP s annual payment for 2016 was made to the State on July 1, Future payments are due on April 4 th of each year. S-2

12 Security... Interest Fund and the Series 2016-B Capitalized Interest Fund, as applicable. BP Settlement Revenues for 2016 were appropriated by the State legislature before the passage of the Enabling Law, were spent by the State during the 2016 fiscal year, and are not available as a source of payment for the Series 2016 Bonds. BP Settlement Revenues for 2017 are not expected to be needed to pay debt service on the Series 2016 Bonds due to the funding of capitalized interest, and the Authority expects to apply such amount for other purposes permitted under the Enabling Law. See SECURITY Funds and Accounts herein. The Series 2016 Bonds will not be general obligations of the Authority. The Series 2016 Bonds shall be limited obligations of the Authority secured by and payable solely from the Pledged Funds, which consist of (i) all right, title and interest of the Authority in and to the BP Settlement Revenues deposited in the BP Settlement Fund and any investment earning thereon, and (ii) amounts held in a debt service fund maintained under the Bond Resolution. The Series 2016 Bonds will be further secured by amounts on deposit in the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund hereinafter described. See SECURITY Funds and Accounts. The Series 2016 Bonds and other payment obligations under the Bond Resolution do not constitute or give rise to an indebtedness or a pecuniary liability of, and do not constitute a charge against the general credit or taxing power of, the State. The Authority has no taxing power. DTC Delivery... It is expected that the Series 2016 Bonds will be delivered in book-entry form through the facilities of The Depository Trust Company ( DTC ), on, Individual purchases of beneficial ownership interests may be made in the principal amount of $5,000 or any integral multiple thereof. Additional Bonds... At the time of issuance of the Series 2016 Bonds, the Series 2016 Bonds will be the only obligations secured by the Pledged Funds. Under the Bond Resolution, the Authority has reserved the right to issue additional bonds secured by and payable from Pledged Funds on parity of lien with the Series 2016 Bonds ( Additional Bonds ) upon compliance with certain conditions. See SECURITY Additional Bonds herein. Optional Redemption... Those of the Series 2016-A Bonds having a stated maturity on and after September 15,, shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on September 15,, and on any date thereafter, at and for a redemption price with respect to each such Series 2016-A Bond (or principal portion thereof) redeemed equal to the par or face amount thereof plus accrued interest to the date set for redemption. See THE SERIES 2016 BONDS Optional Redemption. The Series 2016-B Bonds shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on any date, at and for a redemption price with respect to each such Series 2016-B Bond (or principal portion thereof) redeemed equal to the Make-Whole Redemption Price of each such Series 2016-B Bond (or principal portion thereof) to be redeemed plus accrued interest thereon to the date set for redemption. See THE SERIES 2016 BONDS Optional Redemption. S-3

13 Authority May Not File The Authority is not an eligible debtor under federal bankruptcy law, and Bankruptcy... Alabama state law does not presently permit a petition in bankruptcy, insolvency or reorganization or similar law by or against the Authority. Events of Defaults... Covenants with Respect to Appropriated Funds and the Settlement Agreement... The occurrence of any of the following events will constitute an Event of Default under the Bond Resolution: (a) failure by the Authority to pay the principal of or the interest or premium (if any) on any of the Series 2016 Bonds or any Additional Bonds as and when the same shall become due as provided therein and in the Bond Resolution or any Supplemental Resolution (whether at maturity, upon mandatory redemption prior to maturity or otherwise); (b) failure by the Authority to perform or observe any agreement, covenant or condition required by the Bond Resolution or any Supplemental Resolution to be performed or observed by it (other than its agreement to pay the principal of and the interest and premium, if any, on the Series 2016 Bonds or any Additional Bonds) after thirty (30) days written notice to it of such failure given by any holder of such bonds, unless during such period or any extension thereof the Authority has commenced and is diligently pursuing appropriate corrective action; or (c) the filing of any petition by or against the Authority under the United States Bankruptcy Code or under any other similar law or statute, the appointment by a court of competent jurisdiction of a receiver for the Authority or for a substantial part of its properties or funds, or approval by a court of competent jurisdiction of any petition for rearrangement or readjustment of the obligations of the Authority under any provisions of the bankruptcy laws of the United States of America or the State. Under the Bond Resolution the Authority has covenanted, whenever necessary to ensure timely receipt of the BP Settlement Revenues, to request that the appropriate State officials pursue all appropriate rights and remedies of the State under the Settlement Agreement, the Guaranty Agreements and any alternative form of financial assurance arrangements delivered pursuant to the Settlement Agreement. See SECURITY Authority Covenants Respecting Pursuit of Remedies under Settlement Agreement herein. The State, not the Authority, is the party that must exercise rights under the Settlement Agreement and the Guaranty Agreements, and no default shall result under the Bond Resolution if the appropriate State officials fail to follow the Authority's requests. Ratings... Moody s Investors Service, Inc. has assigned a long-term rating of A2 to the Series 2016 Bonds and Standard & Poor s Global Ratings, a business unit of Standard & Poor s Financial Services, LLC, has assigned a rating of A- to the Series 2016 Bonds. See RATINGS Herein. Legal Considerations... Reference is made to LEGAL CONSIDERATIONS for a description of certain legal issues relevant to an investment in the Series 2016 Bonds. Risk Factors... Reference is made to RISK FACTORS for a description of certain considerations relevant to an investment in the Series 2016 Bonds. Tax Matters... In the opinion of Bond Counsel, under existing law interest on the Series 2016-A Bonds (but not the Series 2016-B Bonds) (i) will be excludable from gross income for federal income tax purposes if the Authority complies with all requirements of the Internal Revenue Code that must be satisfied subsequent to the issuance of the Series 2016-A Bonds in order that interest thereon be and remain excludable from gross income, and (ii) will not be an item of tax preference for purposes of the federal alternative minimum tax S-4

14 on individuals and corporations. Bond Counsel is also of the opinion that under existing law interest on both the Series 2016-A Bonds and the Series 2016-B Bonds will be exempt from State of Alabama income taxation. See TAX MATTERS herein for further information and certain other federal tax consequences arising with respect to the Series 2016 Bonds. S-5

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16 INTRODUCTORY STATEMENT This Official Statement sets forth information concerning the issuance by the Authority of the Series 2016 Bonds, consisting of the Series 2016-A Bonds in the aggregate principal amount of $110,445,000 * and the Series 2016-B Bonds in the aggregate principal amount of $541,880,000 *. The Series 2016 Bonds are being issued pursuant to a Bond Resolution adopted by the Authority (the Bond Resolution ) and under the Enabling Law. The Treasurer of the State of Alabama (the State Treasurer ) has been appointed pursuant to the Bond Resolution to serve as the paying agent for the Series 2016 Bonds. The Authority was created on September 9, 2016, pursuant to the Enabling Law as a public corporation and instrumentality of the State. The members of the Authority are the Governor, the State Treasurer, the Speaker of the House of Representatives of the State, the President Pro Tempore of the State Senate, the Secretary of Labor and the Director of Finance. The Enabling Law provides that the president, vice president, and secretary of the Authority shall be elected by the members of the Authority. Under the Bond Resolution, the Series 2016 Bonds and all Additional Bonds hereafter issued will be secured by the Pledged Funds, which consist of (i) all right, title and interest of the Authority in and to the BP Settlement Revenues deposited in the BP Settlement Fund, and any investment earning thereon (the Appropriated Funds ), and (ii) amounts held in a debt service fund maintained under the Bond Resolution (the Debt Service Fund ). All Pledged Funds are required to be deposited with the State Treasurer for credit to the funds described herein under SECURITY Funds and Accounts. The Series 2016-A Bonds and the Series 2016-B Bonds are further secured by amounts on deposit in the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund, respectively. See Security Funds and Accounts herein. The Enabling Law requires that all BP Settlement Revenues be deposited in a special fund (the BP Settlement Fund ) upon receipt by the State. The Enabling Law includes the irrevocable pledge and appropriation of the amount of BP Settlement Revenues on deposit in the BP Settlement Fund that is required for the payment of debt service on the Series 2016 Bonds and any Additional Bonds. The Enabling Law requires that BP Settlement Revenues in the BP Settlement Fund be applied first for payment of debt service on the Series 2016 Bonds and any Additional Bonds hereafter issued. Any BP Settlement Revenues determined by the governing body of the Authority to be in excess of the amounts needed for payment of debt service on the Series 2016 Bonds and any Additional Bonds may be withdrawn from the BP Settlement Fund and applied to the payment of other costs authorized by the Enabling Law. The State is party to an agreement entered into on October 5, 2015 (the Settlement Agreement ) among the State, Florida, Louisiana, Mississippi, and Texas (such states, the Gulf States ) and BP p.l.c., a company incorporated in England ( BP p.l.c. ), BP Corporation North America Inc., an Indiana corporation ( BPCNA ), and BP Exploration & Production Inc., a Delaware corporation ( BPXP, and together with BPCNA and BP p.l.c, the BP Settlement Agreement Parties ). The Settlement Agreement became effective upon entry of a Consent Decree and Final Judgment in the United States District Court for the Eastern District of Louisiana on April 4, The Settlement Agreement resolved numerous claims against the BP Settlement Agreement Parties, and any parents, subsidiaries, successors and other related entities (collectively, the BP Entities ) arising from or otherwise relating to the blowout, explosion, and fire which occurred aboard the mobile offshore drilling unit Deepwater Horizon on April 20, 2010, and the subsequent release of oil and other substances into the Gulf of Mexico (the Deepwater Horizon Oil Spill ). The Authority is not a party to the Settlement Agreement and has no rights or ability to directly enforce any obligations of any of the BP Settlement Agreement Parties thereunder or under the Primary Guaranty or the Secondary Guaranty (together, the Guaranty Agreements ). The Settlement Agreement and the Guaranty Agreements referable thereto from BP p.l.c and BPCNA are attached as APPENDIX B hereto. Under the Settlement Agreement, BPXP is required to pay certain amounts to the State and the other Gulf States as outlined in Attachment I to the Settlement Agreement. All such payments by BPXP are primarily guaranteed by BPCNA and secondarily guaranteed by BP p.l.c. See THE SETTLEMENT AGREEMENT AND GUARANTY AGREEMENTS herein. Although the Settlement Agreement payments to the State are guaranteed by BPCNA and BP p.l.c., the Series 2016 Bonds are not guaranteed by BPCNA, BP p.l.c. or any other BP entities. * Preliminary, subject to change. 1

17 Any capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Bond Resolution. See FORM OF BOND RESOLUTION in APPENDIX A attached hereto. Date, Form of Series 2016 Bonds and Denominations THE SERIES 2016 BONDS The Series 2016 Bonds will be dated as of their date of initial delivery and will bear interest from the date of issuance at the respective annual fixed interest rates, and will mature in the principal amounts, as set forth on the inside cover of this Official Statement. The Series 2016 Bonds will be issuable only as fully registered bonds in denominations of $5,000 or any multiple thereof. Book Entry System The Series 2016 Bonds are being issued in electronic form under the Book Entry System procedures of The Depository Trust Company ( DTC ). While the Series 2016 Bonds are in the Book Entry System, the method and procedures for payment of the Series 2016 Bonds and matters pertaining to transfers and exchanges of the Series 2016 Bonds will be governed by the rules and procedures of the Book Entry System. If the Book Entry System is discontinued, the Bond Resolution contains alternate provisions for the method of payment and for transfers and exchanges. See APPENDIX D for a description of the DTC Book Entry System. See FORM OF BOND RESOLUTION in APPENDIX A attached hereto for a description of applicable provisions if the Book Entry System is terminated. Calculation of Interest Payments Interest payable on the Series 2016 Bonds will be calculated on the basis of a 360-day year with 12 months of 30 days each. Optional Redemption Those of the Series 2016-A Bonds having a stated maturity on and after September 15,, shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on September 15,, and on any date thereafter, at and for a redemption price with respect to each such Series 2016-A Bond (or principal portion thereof) redeemed equal to the par or face amount thereof plus accrued interest to the date set for redemption. The Series 2016-B Bonds shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on any date, at and for a redemption price with respect to each such Series 2016-B Bond (or principal portion thereof) redeemed equal to the Make-Whole Redemption Price of each such Series 2016-B Bond (or principal portion thereof) to be redeemed plus accrued interest thereon to the date set for redemption. For further discussion of the Make-Whole Redemption Price and the computation thereof, see FORM OF BOND RESOLUTION Optional Redemption in APPENDIX A attached hereto. Make-Whole Redemption Price shall mean, when used with respect to the Series 2016-B Bonds (or any portion thereof) to be redeemed pursuant to the optional redemption provisions of the Bond Resolution, the greater of: (i) 100% of the principal amount of the Series 2016-B Bonds (or portion thereof) to be redeemed, or (ii) the present value of the remaining scheduled payments of principal and interest to the maturity date of the Series B Bonds (or portion thereof), not including interest accrued and unpaid as of the redemption date, discounted to the redemption date at the Adjusted Treasury Rate (as defined in the Bond Resolution) plus basis points, such discounting to be on a semiannual basis assuming a 360-day year consisting of twelve 30-day months. The Make- Whole Redemption Price shall be determined and certified to the State Treasurer by a Calculation Agent, who shall be an independent person or firm retained by the Authority for this purpose and shall have experience in making the computations required to determine a Make-Whole Redemption Price. 2

18 Scheduled Mandatory Redemption Those of the Series 2016-A Bonds having a stated maturity on September 15, 20 (the Series 2016-A 20 Term Bonds ), are subject to mandatory redemption in the following principal amounts on September 15 in the following years at a redemption price with respect to each Series 2016-A 20 Term Bond (or portion thereof) redeemed equal to the principal amount so redeemed: Year Principal Amount To Be Redeemed 20 $ Not later than the date on which notice of mandatory redemption is to be given, the State Treasurer shall select Series 2016-A 20 Term Bonds for redemption by lot; provided, however, that the Authority may, by timely notice delivered to the State Treasurer, direct that any or all of the following amounts be credited against the principal amount of Series 2016-A 20 Term Bonds scheduled for redemption on such date: In the event that the Authority has partially redeemed any 2016-A 20 Term Bonds or has provided for a partial redemption of such 2016-A 20 Term Bonds in such a manner that the 2016-A 20 Term Bonds for the redemption of which provision is made are considered as fully paid, other than Series 2016-A 20 Term Bonds redeemed pursuant to this paragraph, the Authority may elect to apply all or any part (but only in Authorized Denominations) of the principal amount of such 2016-A 20 Term Bonds so redeemed or to be redeemed and not previously claimed as a credit to the reduction of the principal amount of 2016-A 20 Term Bonds required to be redeemed pursuant to the schedule set forth immediately above on any September 15 coterminous with or subsequent to the date such optional redemption actually occurs. Those of the Series 2016-B Bonds having a stated maturity on September 15, 20 (the Series 2016-B 20 Term Bonds ), are subject to mandatory redemption in the following principal amounts on September 15 in the following years at a redemption price with respect to each Series 2016-B 20 Term Bond (or portion thereof) redeemed equal to the principal amount so redeemed: Year Principal Amount To Be Redeemed 20 $ Series 2016-B 20 Term Bonds shall be redeemed pro rata; provided, however, that the Authority may, by timely notice delivered to the State Treasurer, direct that any or all of the following amounts be credited against the principal amount of Series 2016-B 20 Term Bonds scheduled for redemption on any such date: In the event that the Authority has partially redeemed any 2016-B 20 Term Bonds or has provided for a partial redemption of such 2016-B 20 Term Bonds in such a manner that the 2016-B 20 Term Bonds for the redemption of which provision is made are considered as fully paid, other than 2016-A 20 Term Bonds redeemed pursuant to this paragraph, the Authority may elect to apply all or any part (but only in Authorized Denominations) of the principal amount of such 2016-B 20 Term Bonds so redeemed or to be redeemed and not previously claimed as a credit to the reduction of the principal amount of 2016-B 20 Term Bonds required to be redeemed pursuant to the schedule set forth immediately above on any September 15 coterminous with or subsequent to the date such optional redemption actually occurs. 3

19 Selection of Series 2016 Bonds for Redemption Except as otherwise provided, if less than all Series 2016 Bonds of a series are to be optionally redeemed, the principal amount of each maturity and interest rate (if applicable) of such series to be redeemed may be specified by the Authority by notice to the State Treasurer, or, in the absence of timely receipt by the State Treasurer of such notice, shall be selected by the State Treasurer by lot or such other method as the State Treasurer shall deem fair and appropriate; provided, however, that the principal amount of Series 2016 Bonds of such series, maturity and interest rate to be redeemed may not be larger than the principal amount of the Series 2016 Bonds of such series, maturity and interest rate then eligible for redemption and may not be smaller than the smallest authorized Denomination. Except as otherwise provided in the specific redemption provisions for the Series 2016-A Bonds, if less than all Outstanding Series 2016-A Bonds of a particular maturity and interest rate (if applicable) are to be redeemed, the particular Series 2016-A Bonds of such maturity and interest rate to be redeemed shall be selected by lot (in Authorized Denominations) by the State Treasurer not less than 30 nor more than 60 days prior to the redemption date from the Outstanding Series 2016-A Bonds of such maturity and interest rate which have not previously been called for redemption. Pursuant to the current Operational Arrangements of DTC, the Authority has advised DTC that it proposes to use pro rata pass-through distributions of principal with respect to optional redemptions of less than all outstanding principal amounts of Series 2016-B Bonds of any maturity and interest rate (if applicable) and with respect to mandatory redemptions of Series 2016-B 20 Term Bonds. Subject to compliance with such Operational Arrangements of DTC while Series 2016-B Bonds are in the Book-Entry Only System, except as otherwise provided in the specific redemption provisions for the Series 2016-B Bonds, if less than all Outstanding Series 2016-B Bonds of a particular maturity and interest rate are to be redeemed, the Series 2016-B Bonds of such maturity and interest rate shall be redeemed pro rata, rounded to the nearest Authorized Denomination, among the Holders of Series 2016-B Bonds of such maturity and interest rate by redeeming from such Holders that principal amount which bears the same proportion to the principal amount of such maturity and interest rate registered in the name of each such Holder as the total principal amount of such maturity and interest rate to be redeemed bears to the aggregate Outstanding principal amount of Series 2016-B Bonds of such maturity and interest rate. General THE FINANCING PLAN The proceeds of the Series 2016-A Bonds will be used to finance certain transportation projects, to capitalize a portion of the interest payable on the Series 2016-A Bonds and to pay the costs of issuance of the Series 2016-A Bonds, as described herein. The proceeds of the Series 2016-B Bonds will be used to reimburse certain amounts previously withdrawn from the General Fund Rainy Day Account, to reimburse certain amounts previously withdrawn from the Alabama Trust Fund, to provide funds to the Alabama Medicaid Agency during fiscal year 2017 and fiscal year 2018, to capitalize a portion of the interest payable on the Series 2016-B Bonds and to pay the costs of issuance of the Series 2016-B Bonds. Sources and Uses of Funds Bonds: The following table shows the estimated sources and uses of proceeds from the sale of the Series

20 Series 2016-A Bonds* Series 2016-B Bonds * Sources: Sources: Par Amount $._ Par Amount $. Net Original Issue Premium Net Original Issue Premium (Discount). (Discount) Total Sources $. Total Sources $. Uses: Uses: District 91 Project Fund $. General Fund Rainy Day Account $. District 92 Project Fund. Alabama Trust Fund. Series 2016-A Capitalized Interest Fund Cost of Issuance 1.. Alabama Medicaid Agency Fund Series 2016-B Capitalized Interest Fund.. Cost of Issuance 1. Total Uses $. Total Uses $. 1 Cost of issuance includes underwriting discount, legal fees, printing fees, and miscellaneous closing costs. Debt Service Requirements on Series 2016 Bonds The following tables contain the estimated debt service requirements on the Series 2016-A Bonds and the Series 2016-B Bonds: Debt Service on Series 2016-A Bonds * Debt Service on Series 2016-B Bonds* Date Principal Interest Total Principal Interest Total Aggregate Debt Service 3/15/2017 $ --- $1,104,450 $1,104,450 $ --- $3,949, $3,949, $5,054, /15/ ,208,900 2,208, ,899, ,899, ,108, /15/ ,208,900 2,208, ,899, ,899, ,108, /15/ ,208,900 2,208,900 30,005,000 7,899, ,904, ,113, /15/ ,208,900 2,208, ,676, ,676, ,885, /15/ ,208,900 2,208,900 33,865,000 7,676, ,541, ,750, /15/ ,208,900 2,208, ,373, ,373, ,582, /15/ ,208,900 2,208,900 34,520,000 7,373, ,893, ,102, /15/ ,208,900 2,208, ,019, ,019, ,228, /15/ ,208,900 2,208,900 35,270,000 7,019, ,289, ,498, /15/ ,208,900 2,208, ,621, ,621, ,830, /15/ ,208,900 2,208,900 36,135,000 6,621, ,756, ,965, /15/ ,208,900 2,208, ,158, ,158, ,367, /15/ ,208,900 2,208,900 37,110,000 6,158, ,268, ,477, /15/ ,208,900 2,208, ,645, ,645, ,854, /15/ ,208,900 2,208,900 38,160,000 5,645, ,805, ,014, /15/ ,208,900 2,208, ,106, ,106, ,314, /15/ ,208,900 2,208,900 39,295,000 5,106, ,401, ,609, /15/ ,208,900 2,208, ,511, ,511, ,720, /15/ ,208,900 2,208,900 40,535,000 4,511, ,046, ,255, /15/ ,208,900 2,208, ,868, ,868, ,077, /15/ ,208,900 2,208,900 41,870,000 3,868, ,738, ,947, /15/ ,208,900 2,208, ,172, ,172, ,381, * Preliminary, subject to change. 5

21 9/15/ ,208,900 2,208,900 43,320,000 3,172, ,492, ,701, /15/ ,208,900 2,208, ,419, ,419, ,628, /15/ ,208,900 2,208,900 44,875,000 2,419, ,294, ,503, /15/ ,208,900 2,208, ,617, ,617, ,826, /15/ ,208,900 2,208,900 46,535,000 1,617, ,152, ,361, /15/ ,208,900 2,208, , , ,971, /15/2031 7,925,000 2,208,900 10,133,900 40,385, , ,147, ,281, /15/ ,050,400 2,050, ,050, /15/ ,235,000 2,050,400 52,285, ,285, /15/ ,045,700 1,045, ,045, /15/ ,285,000 1,045,700 53,330, ,330, BP Settlement Revenues SECURITY All BP Settlement Revenues received by the State are required to be deposited in the BP Settlement Fund. The Enabling Law provides that the Authority has the power to direct the investment of amounts in the BP Settlement Fund and direct the transfers of such amounts for the purposes stated in the Enabling Law. Pursuant to the Enabling Law, Appropriated Funds, being the funds on deposit in the BP Settlement Fund and earnings thereon, are irrevocably pledged and appropriated in such amounts as shall be necessary to pay and to redeem prior to their respective maturities the principal, interest, and premium (if any) on the Series 2016 Bonds and any Additional Bonds. The application of the Appropriated Funds to the payment of such debt service is to be the first use of any moneys in the BP Settlement Fund. Pursuant to the Enabling Law, any amounts in the BP Settlement Fund determined by the Board of Directors of the Authority to be in excess of the amounts needed for the payment of all amounts due with respect to the Series 2016 Bonds and any Additional Bonds each year may be transferred to and deposited in the Alabama Trust Fund or the General Fund Rainy Day Account, to provide additional funds to the Alabama Medicaid Agency, or to pay the costs of certain transportation projects. The Series 2016 Bonds are not general obligations of the Authority. The Series 2016 Bonds shall be solely and exclusively limited obligations of the Authority secured by and payable solely from the Pledged Funds. In addition to the Pledged Funds, the Series 2016-A Bonds and the Series 2016-B Bonds are secured by and payable from amounts in the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund, respectively, and the debt service payments scheduled for March 15, 2017, through March 15, 2018 are expected to be paid from the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund. Accordingly, BP Settlement Revenues received during 2016 and to be received during 2017 will not be needed to pay debt service on the Series 2016 Bonds. BP Settlement Revenues for 2016 were appropriated by the State legislature before the passage of the Enabling Law and were spent by the State during the 2016 fiscal year. BP Settlement Revenues for 2017 are not expected to be needed to pay debt service on the Series 2016 Bonds, and such amounts are expected to be withdrawn from the BP Settlement Fund and applied by the Authority to other permitted uses under the Enabling Law. See Funds and Accounts below. Funds and Accounts The plan of financing for the Series 2016 Bonds provides for the establishment of the funds and accounts listed below. The Debt Service Fund, the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund are the only funds or accounts established under the Bond Resolution securing the Series 2016 Bonds. Debt Service Fund. Under the Bond Resolution, there is created a Debt Service Fund, which shall remain in effect until the payment in full of the Series 2016 Bonds and any Additional Bonds hereafter issued. The State Treasurer shall, for each one-year period beginning on April 4 (the date the annual payments are due to the State under the Settlement Agreement) of any calendar year and ending on April 3 of the following calendar year (a Settlement Payment Year ), while any of the Series 2016 Bonds or Additional Bonds remain Outstanding, set aside the first Appropriated Funds received for such Settlement Payment Year and cause the moneys so set aside to be deposited into the Debt Service Fund until there is on deposit therein an amount equal to the Debt Service payable on the Series 2016 Bonds and any Additional Bonds during such Settlement Payment Year. 6

22 Appropriated Funds received during a given Settlement Payment Year that are not needed to accomplish or to maintain such required deposits to the Debt Service Fund may be used for any lawful purpose for which such moneys may be applied. If at any time during a given Settlement Payment Year the Authority determines that the amount held in the Debt Service Fund for such Settlement Payment Year is greater than the amount so required to be held, then, to the extent of such surplus, moneys may be withdrawn from the Debt Service Fund and used by the Authority for any lawful purpose for which such moneys may be applied. The State Treasurer shall cause the moneys deposited into the Debt Service Fund to be applied for the payment of the principal, interest and premium (if any) on the Series 2016 Bonds and any Additional Bonds as such principal, interest and premium (if any) becomes due and payable. The State Treasurer, as paying agent for the Series 2016 Bonds, may cause any money on deposit in the Debt Service Fund (i) to be invested in Permitted Investments (as defined in the Bond Resolution) or (ii) to be maintained in an interest bearing deposit account with a depository bank designated by the State Treasurer pursuant to the provisions of Section 9.2 of the Bond Resolution (a Depository ). All such investments must mature or be subject to redemption at the option of the holder on or prior to the respective date when cash funds will be required. Earnings on such investments or deposits shall be deemed at all times a part of the Debt Service Fund, and any such amounts on deposit in the Debt Service Fund shall be credited to the amount required to be deposited into the Debt Service Account. District 91 Project Fund. The Bond Resolution establishes with the State Treasurer a special fund which shall be called the District 91 Project Fund (the District 91 Project Fund ). A portion of the proceeds from the Series 2016-A Bonds will be deposited into the District 91 Project Fund and used to pay the cost of Transportation Projects within Alabama Department of Transportation District 91 of the Southwest Region for Highway 98/Highway 158 from the Mississippi state line to Interstate 65. District 92 Project Fund. The Bond Resolution establishes with the State Treasurer a special fund which shall be called the District 92 Project Fund (the District 92 Project Fund ). A portion of the proceeds of the Series 2016-A Bonds will be deposited into the District 92 Project Fund and used to pay the cost of Transportation Projects within Alabama Department of Transportation District 92 of the Southwest Region. Alabama Medicaid Agency Fund. The Bond Resolution establishes with the State Treasurer a special fund which shall be called the Alabama Medicaid Agency Fund (the Alabama Medicaid Agency Fund ). Proceeds from the Series 2016-B Bonds will be deposited into the Alabama Medicaid Agency Fund and transferred to the Alabama Medicaid Agency during the 2017 and 2018 fiscal years of the State. Series 2016-A Capitalized Interest Fund. The Bond Resolution establishes with the State Treasurer a special fund which shall be called the Series 2016-A Capitalized Interest Fund (the Series 2016-A Capitalized Interest Fund ). A portion of the proceeds of the Series 2016-A Bonds shall be deposited into the Series 2016-A Capitalized Interest Fund. In the Bond Resolution the State Treasurer, as depository for the Series 2016-A Capitalized Interest Fund, is authorized and directed to invest Series 2016-A Capitalized Interest Fund moneys in Permitted Investments, or to maintain such amounts in an interest bearing deposit account with a Depository; provided, such investments shall take into account the amounts to be applied on the dates specified below in order to ensure that sufficient moneys are available for transfer to the Debt Service Fund on such dates. Under the Bond Resolution the Authority has pledged amounts in the Series 2016-A Capitalized Interest Fund for payment of Debt Service on the Series 2016-A Bonds. Moneys in the Series 2016-A Capitalized Interest Fund shall be transferred, without any further need for direction, to the Debt Service Fund and applied by the State Treasurer to the payment of interest on the Series A Bonds as follows: 7

23 Interest Payment Date Capitalized Interest for Series 2016-A Bonds March 15, 2017 $ September 15, 2017 March 15, 2018 In the event there are moneys remaining in the Series 2016-A Capitalized Interest Fund after the payment of interest due on March 15, 2018, then such moneys shall be applied to the payment of interest in the Series 2016-A Bonds on September 15, Series 2016-B Capitalized Interest Fund. The Bond Resolution establishes with the State Treasurer a special fund which shall be called the Series 2016-B Capitalized Interest Fund (the Series 2016-B Capitalized Interest Fund ). A portion of the proceeds of the Series 2016-B Bonds shall be deposited into the Series 2016-B Capitalized Interest Fund. In the Bond Resolution the State Treasurer, as depository of the Series 2016-B Capitalized Interest Fund, is authorized and directed to invest Series 2016-B Capitalized Interest Fund moneys in Permitted Investments, or to maintain such amounts in an interest bearing deposit account with a Depository; provided such investments shall take into account the amounts to be applied on the dates specified below in order to ensure that sufficient moneys are available for transfer to the Debt Service Fund on such dates. Under the Bond Resolution the Authority has pledged amounts in the Series 2016-B Capitalized Interest Fund for payment of Debt Service on the Series 2016-B Bonds. Moneys in the Series 2016-B Capitalized Interest Fund shall be transferred, without any further need for direction, to the Debt Service Fund and applied by the State Treasurer to the payment of interest on the Series B Bonds as follows: Interest Payment Date Capitalized Interest for Series 2016-B Bonds March 15, 2017 $ September 15, 2017 March 15, 2018 In the event there are moneys remaining in the Series 2016-B Capitalized Interest Fund after the payment of interest due on March 15, 2018, then such moneys shall be applied to repay the Alabama Trust Fund for amounts transferred to the State General Fund in fiscal years 2013, 2014 and 2015 pursuant to Section 4 of Amendment 856 to the Constitution of Alabama of 1901, as amended. Cost of Issuance Fund. The Bond Resolution establishes with the State Treasurer a special fund called the BP Settlement Revenue Bonds, Series 2016-A and Series 2016-B Cost of Issuance Fund (the Cost of Issuance Fund ). Deposits into the Cost of Issuance Fund shall be made with proceeds of the Series 2016 Bonds as specified in the Bond Resolution and used to pay all the expenses of issuing the Series 2016 Bonds. Rebate Fund. The Bond Resolution establishes with the State Treasurer a special fund entitled BP Settlement Revenue Bonds, Series 2016-A Rebate Fund (the Rebate Fund ). The State Treasurer shall be the custodian for the Rebate Fund. A deposit into the Rebate Fund shall be made annually if and to the extent required by the provisions of the Bond Resolution. Money on deposit in the Rebate Fund shall be invested in Permitted Investments or maintained in an interest bearing deposit account with a Depository, and all investment income shall be retained in the Rebate Fund. Moneys on deposit in the Rebate Fund shall be disbursed by the State Treasurer from time to time for the purpose of paying any Required Rebate. 8

24 Funds Held by State Treasurer Any cash on deposit in any of the funds or accounts created in the Bond Resolution and held by the State Treasurer, as paying agent for the Series 2016 Bonds, shall be impressed with a trust for the purpose for which such funds or accounts are created and shall be kept on deposit in U.S. dollar denominated deposit accounts and certificates of deposit with banks or savings associations that are qualified public depositories under Chapter 14A of Title 41 of the Code of Alabama 1975, as amended. Any money held by the State Treasurer, as paying agent for the Series 2016 Bonds, in the Debt Service Fund for the payment of debt service on the Series 2016 Bonds or any Additional Bonds and remaining unclaimed for 3 years after such debt service has become due and payable shall be paid in accordance with applicable Alabama law relating to unclaimed property. Additional Bonds Under the Bond Resolution, the Authority may authorize, issue, sell and deliver from time to time additional bonds (the Additional Bonds ) secured by and payable from Pledged Revenues on a parity with the Series 2016 Bonds in such principal amounts as the Authority may determine. Such Additional Bonds may be issued for any lawful purpose, including to refund Series 2016 Bonds or Additional Bonds lawfully issued, whether by exchange, purchase, redemption or payment. Prior to the issuance of any Additional Bonds, the Authority shall first deliver to the State Treasurer the Additional Bonds proposed to be issued, duly executed and accompanied by the following: (1) a copy of a Supplemental Resolution duly certified as having been adopted by the Board of Directors of the Authority and containing (i) a description of the Additional Bonds to be issued, including the form of the Additional Bonds and various certificates applicable thereto, the aggregate principal amount, the numbers and series designation, the denomination or denominations, the dated date, the interest rate or rates, the maturity or maturities thereof, and the provisions for the redemption thereof prior to maturity, (ii) a statement of the purpose for which such Additional Bonds are proposed to be issued, (iii) a reference to the act or acts of the Legislature of the State of Alabama pursuant to which such Additional Bonds are authorized to be issued, and (iv) any other provision that does not conflict with the provisions of Section 7.2 of the Bond Resolution; (2) a request that the State Treasurer (or a delegate of the State Treasurer) authenticate and deliver the Additional Bonds proposed to be issued and reciting (i) that no default in the payment of the principal of or interest on the Series 2016 Bonds or any Outstanding Additional Bonds has occurred and is continuing, (ii) the person or persons to whom such Additional Bonds have been sold and awarded and shall be delivered, (iii) the purchase price of such Additional Bonds, or if such Additional Bonds are to be exchanged for obligations to be refunded, a statement to that effect, and (iv) a list of all Bonds and Additional Bonds previously issued by the Authority and at the time Outstanding; (3) a certificate of the State Director of Finance to the effect that (i) the revenues received or to be received by the State pursuant to the Settlement Agreement for the one year period beginning on April 4 of any calendar year and ending on April 3 of the following calendar year (the Annual Settlement Agreement Revenues ) for the then current and each subsequent Settlement Payment Year are not less than the Annual Debt Service payable during each such Settlement Payment Year on the Series 2016 Bonds and all Additional Bonds that will be Outstanding immediately following the issuance of the Additional Bonds proposed to be issued; and (4) an Opinion of Bond Counsel dated as of the date of the issuance of such Additional Bonds approving the validity of such Additional Bonds. See FORM OF BOND RESOLUTION Additional Bonds in APPENDIX A attached hereto. Events of Default and Remedies Under the Bond Resolution Event of Default means any one of the events set forth below: (a) failure by the Authority to pay the principal of or the interest or premium (if any) on any of the Series 2016 Bonds or any Additional Bonds as and when the same shall become due as therein and as provided in the Bond Resolution or any Supplemental Resolution (whether at maturity, upon mandatory redemption prior to maturity or otherwise); (b) failure by the Authority to perform or observe any agreement, covenant or condition required by the Bond Resolution or any Supplemental Resolution to be performed or observed by it (other than its agreement to pay the principal of and the interest and premium, if any, on the Series 2016 Bonds or any Additional Bonds) after 9

25 thirty (30) days written notice to it of such failure given by any holder of such bonds, unless during such period or any extension thereof the Authority has commenced and is diligently pursuing appropriate corrective action; or (c) the filing of any petition by or against the Authority under the United States Bankruptcy Code or under any other similar law or statute, the appointment by a court of competent jurisdiction of a receiver for the Authority or for a substantial part of its properties or funds, or approval by a court of competent jurisdiction of any petition for rearrangement or readjustment of the obligations of the Authority under any provisions of the bankruptcy laws of the United States of America or the State. Upon the occurrence and continuation of any Event of Default, any holder of Series 2016 Bonds or Additional Bonds shall have the right (a) to the extent permitted by law, to sue on the bonds, (b) by mandamus, suit or other proceedings, to enforce or compel performance of all agreements of the Authority in the Bond Resolution or any Supplemental Resolution, (c) by action or suit in equity, to require the Authority to account as if it were the trustee of an express trust for the holders of such bonds, and (d) by action or suit in equity, to enjoin any act or things which may be unlawful or in violation of the rights of the holders of such bonds. Covenants with Respect to Appropriated Funds and the Settlement Agreement The Authority will request that the State not consent to any modification of the schedule of payments to the State set as forth in the Settlement Agreement unless (i) the Annual Settlement Agreement Revenues to be received by the State in each Settlement Payment Year pursuant to the modified payment schedule will not be less than the Annual Debt Service in each such Settlement Payment Year or (ii) the Authority obtains the consent of the Holders of all Bonds and Additional Bonds Outstanding. Whenever the consent of the State is required under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty, or otherwise requested by a party thereto, to approve any action of any party or a modification of any right of the State under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty, the Authority will request that the State withhold its consent unless the Authority determines in good faith that providing its consent is in the best interest of Bondholders. Notwithstanding the foregoing, the Authority will request that the State not consent to (i) any assignment of the Primary Guaranty or the Secondary Guaranty or the release of BP Corporation North America Inc. or BP p.l.c., respectively, from their obligations thereunder pursuant to Section 5.5 of the Settlement Agreement or (ii) the modification and/or replacement of the Primary Guaranty or Secondary Guaranty with any alternative form of financial assurance pursuant to Section 5.6 of the Settlement Agreement, unless, in any such case, the Authority first obtains either (1) written confirmation from Moody's and S&P (if such rating agency maintains a rating on the Bonds or any Additional Bonds at such time) that the proposed action will not result in a reduction by such rating agency of the rating assigned to the Bonds or any Additional Bonds Outstanding or (2) the consent of 100% in principal amount of the Holders of any Bonds and Additional Bonds Outstanding at such time. Upon the occurrence of a Change In Control or an Act of Insolvency, each as defined in the Settlement Agreement, the Authority shall request the appropriate State officials to elect to accelerate the entire schedule of payments to the State under the Settlement Agreement unless the Authority, in its reasonable judgment, determines that an election to accelerate is not in the best interest of the Bondholders. Also, whenever necessary to ensure timely receipt of the BP Settlement Revenues, the Authority shall request that the appropriate State officials pursue all appropriate rights and remedies of the State under the Settlement Agreement, the Guaranty Agreements and any alternative form of financial assurance agreements delivered pursuant to the Settlement Agreement. The State, not the Authority, is the party that must exercise rights and remedies under the Settlement Agreement, the Primary Guaranty and the Secondary Guaranty, and no default will result under the Bond Resolution if the appropriate State officials fail to follow the Authority's requests. The Authority shall not be liable to Bondholders for any decisions or actions with respect to the exercise of rights and remedies under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty made or taken in good faith and in compliance with the foregoing, without limitation, any decision to request that the State consent or not consent to (i) any actions for which consent may be required by, or requested under, the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty or (ii) any proposed modifications to the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty. 10

26 ESTIMATED DEBT SERVICE REQUIREMENTS AND SCHEDULE OF BP SETTLEMENT PAYMENTS * Set forth below are schedules showing the estimated semi-annual debt service requirements for the Series 2016 Bonds compared to the scheduled payments in 2018 and thereafter of BP Settlement Revenues as set forth in the Settlement Agreement. The following assumes that the BP Settlement Revenues scheduled to be paid in 2018 and thereafter are paid on time and in accordance with the requirements under the Settlement Agreement. Date Debt Service Payment* BP Payment Capitalized Interest * Balance in BP Settlement Fund * 1 3/15/2017 $5,054,015 $ - $ 5,054,015 $ - 4/04/ Payment Not Expected to be Needed - - 9/15/ ,108,031-10,108,031-3/15/ ,108,031-10,108,031-4/04/ ,000,000-50,000,000 9/15/ ,113, ,886,970 3/15/2019 9,885, ,876 4/04/ ,333,333-53,335,209 9/15/ ,750, ,585,116 3/15/2020 9,582, ,606 4/04/ ,333,333-53,335,939 9/15/ ,102, ,233,430 3/15/2021 9,228, ,268 4/04/ ,333,333-53,338,601 9/15/ ,498, ,840,439 3/15/2022 8,830, ,594 4/04/ ,333,333-53,342,927 9/15/ ,965, ,377,082 3/15/2023 8,367, ,848 4/04/ ,333,333-53,343,181 9/15/ ,477, ,865,948 3/15/2024 7,854, ,946 4/04/ ,333,333-53,345,279 9/15/ ,014, ,331,277 3/15/2025 7,314, ,286 4/04/ ,333,333-53,349,619 9/15/ ,609, ,739,627 3/15/2026 6,720, ,972 4/04/ ,333,333-53,352,305 9/15/ ,255, ,096,650 3/15/2027 6,077, ,488 4/04/ ,333,333-53,352,821 9/15/ ,947, ,405,659 3/15/2028 5,381, ,586 4/04/ ,333,333-53,357,919 9/15/ ,701, ,656,846 3/15/2029 4,628, ,458 4/04/ ,333,333-53,361,791 9/15/ ,503, ,858,402 3/15/2030 3,826, ,155 4/04/ ,333,333-53,365,488 9/15/ ,361, ,004,240 * Preliminary, subject to change. 1 Assumes no investment earnings. Also assumes balance in BP Settlement Fund after payment of annual debt service is retained in the BP Settlement Fund and available for subsequent debt service and not withdrawn and used for other lawful purposes as allowed under the Enabling Law and the Bond Resolution. 2 April 4th payment dates are assumed based on the Settlement Agreement. 11

27 3/15/2031 2,971, ,074 4/04/ ,333,333-53,366,407 9/15/ ,281, ,085,240 3/15/2032 2,050, ,840 4/04/ ,333,333-53,368,173 9/15/ ,285, ,082,773 3/15/2033 1,045, ,073 4/04/ ,333,333-53,370,406 9/15/ ,330, ,706 THE SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS The following includes a brief summary of certain provisions of the Settlement Agreement and the Guaranty Agreements. This summary is not complete and is subject to, and qualified in its entirety by reference to, the copies of the Settlement Agreement and the Guaranty Agreements, which are attached hereto as APPENDIX B. The Settlement Agreement General. The Settlement Agreement is a settlement of litigation between the Gulf States and the BP Entities concerning the Deepwater Horizon Oil Spill. The Authority is not a party to the Settlement Agreement and has no power or authority to pursue claims or remedies thereunder, or to control any modification of that agreement. Pursuant to the Settlement Agreement, the Gulf States agreed to settle certain past, present and future claims against the BP Entities in exchange for agreements (including, without limitation, annual payments) and undertakings by the BP Entities concerning a number of issues. In accordance with the Settlement Agreement, the BP Settlement Agreement Parties agreed to pay a total amount of $4,900,000,000, of which Alabama is entitled to $1,000,000,000. Payments to the State under the Settlement Agreement are separate and distinct from payments to the other Gulf States. See SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS in APPENDIX B attached hereto. Annual Payments to the State. Under the Settlement Agreement, BPXP is required to make the following annual payments on each April 4 through April 4, 2033, to the State: Year Payments to Alabama $100,000,000* ,000,000** ,000, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333, ,333,338 * Amounts have been expended and are not available to pay debt service on Series 2016 Bonds. ** Amounts will not be necessary to pay debt service. See SECURITY BP Settlement Revenues herein. Such amounts will be applied to other uses as permitted under the Enabling Law. 1 BPXP s annual payment for 2016 was made to the State on July 1,

28 Modification. The Settlement Agreement, and the payments described above, may not be modified without the express written consent of all the Gulf States (including the State), BPXP, BPCNA, and BP p.l.c. See SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS in APPENDIX B attached hereto. The Authority cannot control whether the State agrees to any such modifications. The Authority will request that the State not consent to any modification of the schedule of payments to the State set as forth in the Settlement Agreement unless (i) the Annual Settlement Agreement Revenues to be received by the State in each Settlement Payment Year pursuant to the modified payment schedule will not be less than the Annual Debt Service in each such Settlement Payment Year or (ii) the Authority obtains the consent of the Holders of all Bonds and Additional Bonds Outstanding. See SECURITY Covenants with Respect to Appropriated Funds and the Settlement Agreement herein. The Guaranty Agreements As required by the Settlement Agreement, BPCNA has delivered a primary guaranty (the Primary Guaranty ), which guarantees payments of the BP Settlement Revenues due to the State in the event that BPXP defaults on payments of the BP Settlement Revenues. See SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS in APPENDIX B attached hereto. Under the Primary Guaranty BPCNA is required to make payments of the BP Settlement Revenues to the State in the event that (i) BPXP has failed to make such payments within sixty (60) days after such payments have become due under the Settlement Agreement, (ii) BPXP has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, or (iii) any third party has petitioned a court to place BPXP in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief has been entered, and any such filing or petition has not been dismissed within sixty (60) days of such order for relief. Additionally, pursuant to the Settlement Agreement, BP p.l.c has delivered a secondary guaranty (the Secondary Guaranty ), which guarantees payments of the BP Settlement Revenues due to the State in the event that (i) BPXP defaults on such payments and (ii) BPCNA defaults on its obligation to serve as primary guarantor of such payments. According to the Settlement Agreement, BPCNA shall be considered in default on its guaranty of a payment of BP Settlement Revenues to a Gulf State under the Settlement Agreement if BPXP has defaulted on such payment and any of the following conditions have occurred: (a) BPCNA has failed to make a payment of BP Settlement Revenues required under the primary guaranty within sixty (60) days after a BPXP default, (b) BPCNA has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, or (c) any third party has petitioned a court to place BPCNA in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief has been entered, and any such filing or petition has not been dismissed within sixty (60) days of such order for relief. In accordance with the terms of the Secondary Guaranty, BP p.l.c guarantees that if (1) there exists and is continuing a BPXP default and (2) there exists and is continuing a BPCNA default, BP p.l.c shall, within fifteen (15) business days of such BPCNA default, pay any sum of money of any kind owed to the State then due and payable by BPXP. In the Settlement Agreement, BPXP and BP p.l.c. are required to deliver similar agreements to each of the other Gulf States. In accordance with Section 5.6 of the Settlement Agreement, upon request of BPCNA or BP p.l.c and written approval of any of the Gulf States, the Primary Guaranty and/or the Secondary Guaranty may be modified and/or replaced with an alternative form of financial assurance such as a letter of credit or trust agreement solely with respect to BPXP s payment obligations to the approving state or states under the Settlement Agreement. Any such modification or replacement shall be in writing, fully executed by the approving state or states and the applicable BP Settlement Agreement Party as to which such modification or replacement is made, and consented to in writing by the other Gulf States. See SECURITY Covenants with Respect to Appropriated Funds and the Settlement Agreement. RISK FACTORS In making a decision whether to purchase the Series 2016 Bonds, potential investors should consider certain risks and investment considerations which could affect the ability of the BP Settlement Agreement Parties to make their required payments under the Settlement Agreement, the Primary Guaranty and the Secondary Guaranty, and thus the Authority to timely pay debt service on the Series 2016 Bonds and which could affect the marketability 13

29 of or the market price for the Series 2016 Bonds. Certain of these risks and investment considerations are set forth in this section for convenience, but this discussion is not intended to be a comprehensive or exhaustive compilation of all possible risks and investment considerations nor a substitute for an independent evaluation of the information presented in this Official Statement. Each prospective investor of Series 2016 Bonds should read this Official Statement in its entirety, including the appendices hereto, and should consult such prospective investor's own investment and/or legal advisor for a more complete explanation of the matters that should be considered when evaluating an investment such as the Series 2016 Bonds. Each prospective investor should carefully examine his, her or its own financial condition in order to make a judgment as to his, her or its ability to bear the risk of an investment in the Series 2016 Bonds. Risks Relating to the BP Settlement Agreement Parties The payment of debt service on the Series 2016 Bonds relies entirely on the ability of the BP Settlement Agreement Parties to timely make the payments required to the State under the Settlement Agreement and Guaranty Agreements, which will be influenced heavily by the financial performance of BP p.l.c., BPCNA, and BPXP. BP p.l.c. submitted its Annual Financial Report for the year ended December 31, 2015 (the BP Annual Report ), pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, which report states certain risks, separately or in combination, which could have a material adverse effect on the implementation of its strategy, business, financial performance, results of operations, cash flows, liquidity, prospects, shareholder value and returns, and reputation. The BP Annual Report was prepared by a third party and may not disclose all risks which could affect BP s ability to make payments of BP Settlement Revenues and, consequently, the Authority s ability to timely pay debt service on the Series 2016 Bonds. The Authority has played no role in the preparation of the BP Annual Report. The Authority has not undertaken to update such BP Annual Report or to provide prospective investors with any additional annual reports prepared by BP p.l.c. For more information, see EXCERPTS FROM BP P.L.C. DECEMBER 31, 2015 ANNUAL REPORT in APPENDIX F hereto. Other Risks Relating to the Settlement Agreement and Related Statutes Amendments, Waivers and Termination. As a Settlement Agreement between the BP Settlement Agreement Parties and the Gulf States, the Settlement Agreement is subject to modification in accordance with its terms. The Authority is not a party to the Settlement Agreement; accordingly, the Authority has no right to challenge any such modification, waiver or termination. While the economic interests of the State and the Bondholders will presumably be the same in many circumstances, no assurance can be given that such a modification, waiver or termination of the Settlement Agreement would not have a material adverse effect on the Bondholders. See THE SETTLEMENT AGREEMENT AND GUARANTY AGREEMENTS Amendments and Waivers and SECURITY Covenants with Respect to Appropriated Funds and the Settlement Agreement herein. Reliance on State Enforcement of the Settlement Agreement and State Non-Impairment. The State may not convey and has not conveyed to the Authority or the Bondholders any right to enforce the terms of the Settlement Agreement or the Guaranty Agreements. Pursuant to its terms, the Settlement Agreement, as it relates to the State, can only be enforced by the State. Failure by the State to enforce the Settlement Agreement may have a material adverse effect on the Bondholders. It is also possible that the State could attempt to claim some or all of the Pledged Funds for itself or otherwise interfere with the security for the Series 2016 Bonds. In that event, the Bondholders, the State Treasurer or the Authority may assert claims based on contractual, fiduciary or constitutional rights, but no prediction can be made as to the disposition of such claims. See Authority s Immunity from Suits to Enforce Payment of Bonds and Other Obligations below and SECURITY Covenants with Respect to Appropriated Funds and the Settlement Agreement herein. Bankruptcy of BP Settlement Agreement Parties May Delay, Reduce, or Eliminate Payments of Pledged Funds The only significant source of payment for the Series 2016 Bonds is the Pledged Funds that are funded from BP Settlement Revenues. Such revenues are guaranteed primarily by BPCNA, and secondarily by BP p.l.c. Therefore, if BPXP, BPCNA, and/or BP p.l.c were to become a debtor in a case under Title 11 of the United States Code (the Bankruptcy Code ), there could be delays in or reductions or elimination of payments on the Series 2016 Bonds, and Bondholders and beneficial owners of the Series 2016 Bonds could incur losses on their investments. 14

30 In the event of the bankruptcy of BPXP, BPCNA, and/or BP p.l.c, unless approval of the bankruptcy court is obtained, the automatic stay provisions of the Bankruptcy Code could prevent any action by the State, the Authority, the State Treasurer, the Bondholders, or the beneficial owners of the Series 2016 Bonds to collect any Pledged Funds or any other amounts owing by the bankrupt BP Settlement Agreement Party. In addition, even if BPXP or other bankrupt guarantor wanted to continue paying the Pledged Funds, it could be prohibited as a matter of law from making such payments. In particular, if it were to be determined that the Settlement Agreement was not an executory contract under the Bankruptcy Code, then BPXP or another guarantor could be unable to make further payments of Pledged Funds. If the Settlement Agreement is determined in a bankruptcy case to be an executory contract under the Bankruptcy Code, BPXP or another bankrupt guarantor could be able to repudiate the Settlement Agreement and stop making payments under it. Series 2016 Bonds Secured Solely by the Pledged Funds Investors in the Series 2016 Bonds must look solely to the Pledged Funds for repayment of their investment. The Series 2016 Bonds do not constitute an indebtedness or an obligation of the State or any subdivision thereof, within the purview of any constitutional or statutory limitation or provision or a charge against the general credit or taxing powers, if any, of any of them. No owner of any Series 2016 Bond has the right to compel the exercise of the taxing power of the State to pay any amounts owing on the Series 2016 Bonds. The assets of the Authority (other than the Pledged Funds) are not pledged to the payment of, nor are they security for, the Series 2016 Bonds. The Authority s only source of funds for payments on the Series 2016 Bonds is the Pledged Funds and amounts on deposit in the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund pledged to the Series 2016-A Bonds and the Series 2016-B Bonds, respectively. The Authority has no taxing power. Nature of the Ratings of the Series 2016 Bonds; Reduction, Suspension or Withdrawal of a Rating The Series 2016 Bonds will be assigned a rating by Moody s Investors Service, Inc. ( Moody s ) and a rating by Standard & Poor s Global Ratings, a business unit of Standard & Poor s Financial Services, LLC ( S&P ) prior to the initial issuance thereof. Any rating assigned to the Series 2016 Bonds by a rating agency will reflect such rating agency s assessment of the likelihood of the payment of the principal of (including by operation of scheduled mandatory redemption, if applicable) the Series 2016 Bonds. The ratings of the Series 2016 Bonds will not be a recommendation to purchase, hold or sell the Series 2016 Bonds and such ratings will not address the marketability of the Series 2016 Bonds, any market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be lowered, suspended or withdrawn entirely by a rating agency if, in such rating agency s judgment, circumstances so warrant based on factors prevailing at the time. Any such reduction, suspension or withdrawal of a rating, if it were to occur, could materially adversely affect the availability of a market for, or the market price of, the Series 2016 Bonds. Additionally, the ratings on the Series 2016 Bonds are based primarily on the rating of BP p.l.c. Any downgrade of the rating of BP p.l.c would likely result in a downgrade of the rating of the Series 2016 Bonds. Further, an assignment or modification of the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty or a substitution of an alternative form of financial assurance for either the Primary Guaranty or the Secondary Guaranty may result in a downgrade of the rating of the Series 2016 Bonds. See SECURITY Covenants with Respect to Appropriated Funds and the Settlement Agreement herein. Authority s Immunity from Suits to Enforce Payment of Bonds and Other Obligations Section 14 of The Constitution of Alabama of 1901, as amended (the Alabama Constitution ) provides that the State shall never be made a defendant in any court of law or equity. The immunity from suit granted by Section 14 of the Alabama Constitution is known as the doctrine of sovereign immunity. Sovereign immunity extends to officers of the State acting in their official capacities, subject to certain limited exceptions, such as actions to compel State officials to perform ministerial acts or to perform their legal duties. The Supreme Court of Alabama recently held in Wheeler v. George, 39 So. 3d 1061 (Ala. 2009), that the Alabama Incentives Finance Authority, a public corporation of the State (the AIFA ), is entitled to sovereign immunity as a State agency due to the character of the power delegated to the AIFA by the State, the AIFA s relationship to the State, and the nature of the functions AIFA performs. It is unclear whether or not a court would treat the Authority as a State agency for purposes of 15

31 sovereign immunity, but if so there can be no assurance that holders of the Series 2016 Bonds would have any right of action against the Authority to enforce the obligations of the Authority under the Series 2016 Bonds in the event the Authority fails to make timely payment of principal or interest on the Series 2016 Bonds. However, certain officers of the Authority are, under existing law, subject to mandamus in the event that they have Pledged Funds available for payment of debt service on the Series 2016 Bonds and do not apply such money as and to the extent provided in the Bond Resolution. Tax-Exempt Status of Series 2016-A Bonds It is expected that the Series 2016-A Bonds will qualify as tax-exempt obligations for federal income tax purposes as of the date of issuance. See TAX MATTERS. It is anticipated that Bond Counsel will render an opinion substantially in the form attached hereto as APPENDIX C, which should be read in its entirety for a complete understanding of the scope of the opinions and the conclusions expressed therein. A legal opinion expresses the professional judgment of the attorney rendering the opinion as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. The tax status of the Series 2016-A Bonds could be affected by post-issuance events. There are various requirements of the Internal Revenue Code that must be observed or satisfied after the issuance of the Series 2016-A Bonds in order for the Series 2016-A Bonds to qualify for, and retain, tax-exempt status. These requirements include appropriate use of the proceeds of the Series 2016-A Bonds, use of the facilities financed by the Series 2016-A Bonds, investment of bond proceeds, and the rebate of so-called excess arbitrage earnings. Compliance with these requirements is the responsibility of the Authority. The Internal Revenue Service conducts an audit program to examine compliance with the requirements regarding tax-exempt status. Under current IRS procedures, in the initial stages of an audit with respect to the Series 2016-A Bonds, the Authority would be treated as the taxpayer, and the owners of the Series 2016-A Bonds may have limited rights to participate in the audit process. The initiation of an audit with respect to the Series 2016-A Bonds could adversely affect the market value and liquidity of the Series 2016-A Bonds, even though no final determination about the tax-exempt status has been made. If an audit results in a final determination that the Series 2016-A Bonds do not qualify as tax-exempt obligations, such a determination could be retroactive in effect to the date of issuance of the Series 2016-A Bonds. In addition to post-issuance compliance, a change in law after the date of issuance of the Series 2016-A Bonds could affect the tax-exempt status of the Series 2016-A Bonds or the effect of investing in the Series 2016-A Bonds. For example, the United States Congress could eliminate or limit the exemption for interest on the Series 2016-A Bonds, or it could reduce or eliminate the federal income tax, or it could adopt a so-called flat tax, or it could reduce or eliminate the benefit of tax-exempt interest for certain taxpayers. The Bond Resolution does not provide for the payment of any additional interest or penalty if a determination is made that the Series 2016-A Bonds do not comply with the existing requirements of the Internal Revenue Code or if a subsequent change in law adversely affects the tax-exempt status of the Series 2016-A Bonds or the effect of investing in the Series 2016-A Bonds. LEGAL CONSIDERATIONS The following discussion summarizes some, but not all, of the possible legal issues that could affect the Series 2016 Bonds. The discussion does not address every possible legal challenge that could result in a decision that would cause the BP Settlement Revenues (including Pledged Funds) to be reduced or eliminated. References in the discussion to various opinions are incomplete summaries of such opinions and are qualified in their entirety by reference to the actual opinions. 16

32 Bankruptcy Considerations General. The enforceability of the rights and remedies of the State (and thus the Holders of the Series 2016 Bonds) and of the obligations of the BP Settlement Agreement Parties under the Settlement Agreement and the Guaranty Agreements are subject to the Bankruptcy Code and to other applicable insolvency, moratorium or similar laws relating to or affecting the enforcement of creditors rights generally. Some of the risks associated with a bankruptcy of the BP Settlement Agreement Parties are described below and include the risks of delay in or reduction of amount of the payment or of nonpayment under the Settlement Agreement and the Guaranty Agreements and the risk that the State (and, thus, the Authority) may be stayed for an extended time from enforcing any rights under the Settlement Agreement and the Guaranty Agreements or with respect to the payments owed by the bankrupt BP Settlement Agreement Parties or from commencing legal proceedings against the bankrupt BP Settlement Agreement Parties. As a result, if the BP Settlement Agreement Parties each become a debtor in a bankruptcy case and default in making payments required under the Settlement Agreement or the Guaranty Agreements, funds available to the Authority to pay Holders of the Series 2016 Bonds may be reduced or eliminated. Furthermore, certain payments previously made to Holders of the Series 2016 Bonds could be avoided as preferential payments, so that Holders of the Series 2016 Bonds would be required to return such payments to the bankrupt BP Settlement Agreement Parties, as applicable. Chapter 7 Bankruptcy. If a BP Settlement Agreement Party becomes bankrupt and does not reorganize under Chapter 11, it will be liquidated under Chapter 7 of the Bankruptcy Code, in which event its operations will cease and its assets will be sold. In such an event, there would likely be a significant reduction, or even elimination, of payments received from the BP Settlement Agreement Party that is in the Chapter 7 case. Chapter 11 Reorganization. Should a BP Settlement Agreement Party become a debtor in a Chapter 11 reorganization bankruptcy case, the BP Settlement Agreement Party may not be authorized to make any payments owing under the Settlement Agreement or under a Guaranty Agreement, or may be required to obtain bankruptcy court approval before making such payments. Legal proceedings necessary to determine whether such BP Settlement Agreement Party s obligations under the Settlement Agreement and the Guaranty Agreements can be paid during the pendency of the bankruptcy proceedings could be time-consuming and could result in delays in, or elimination of, payments by the bankrupt BP Settlement Agreement Party. Examples of other bankruptcy-related risks include: Settlement Agreement and Guaranty Agreements as Executory Contracts. The treatment of the Settlement Agreement and the Guaranty Agreements under the Bankruptcy Code may be dependent upon whether the Settlement Agreement and/or the Guaranty Agreements are construed to be executory contracts (which are not defined by the Bankruptcy Code but generally are considered to be contracts in which performance remains due to some extent from both parties). Under the Bankruptcy Code, if the Settlement Agreement and/or the Guaranty Agreements are treated as executory contracts, a trustee in bankruptcy or a BP Settlement Agreement Party acting as a debtor-in-possession would have the right to assume or reject the Settlement Agreement and the Guaranty Agreements. However, there is no time period within which a trustee or BP Settlement Agreement Party in bankruptcy would be required to assume or reject the Settlement Agreement and the Guaranty Agreements. Legal proceedings necessary to resolve the issue of whether the Settlement Agreement and/or the Guaranty Agreements are executory contracts under the Bankruptcy Code could be time consuming and could result in delays in, or elimination of, payments by the bankrupt BP Settlement Agreement Party. Assumption or Rejection of Settlement Agreement and the Guaranty Agreements. Should a bankrupt BP Settlement Agreement Party determine to assume the Settlement Agreement and the Guaranty Agreements, it would have to cure all outstanding Settlement Agreement and the Guaranty Agreement payment defaults and provide adequate assurance that all future payments under the Settlement Agreement and the Guaranty Agreements will be paid in full. Adequate assurance is not defined in the Bankruptcy Code and is determined by the bankruptcy court. If the bankruptcy court rules that the BP Settlement Agreement Party cannot provide such adequate assurance, payments under the Settlement Agreement and the Guaranty Agreements may be delayed or eliminated. If a bankrupt BP Settlement Agreement Party determines to reject the Settlement Agreement and the Guaranty Agreements, the State (and thus the Authority, the State Treasurer and the Bondholders, as collateral 17

33 assignees) may then have a prepetition unsecured, nonpriority claim for damages. Rejection of an executory contract should be treated as a breach of the contract by the BP Settlement Agreement Party. However, under the Bankruptcy Code, the State (and thus the Authority, the State Treasurer and the Bondholders) nevertheless may be enjoined from commencing or continuing any action against the BP Settlement Agreement Party to enforce remedies under the Settlement Agreement and the Guaranty Agreements (including an action to collect payments due under the Settlement Agreement and the Guaranty Agreements). In addition, because amounts owed by the BP Settlement Agreement Party under the Settlement Agreement and the Guaranty Agreements are not fixed, legal proceedings may be necessary to quantify the claims of the State (and thus the Authority, the State Treasurer and the Bondholders) for damages as a result of the BP Settlement Agreement Party s rejection of the Settlement Agreement and the Guaranty Agreements. Such legal proceedings could be time consuming and could result in delays, reductions, or elimination of, payments by the bankrupt BP Settlement Agreement Party. Modification of Settlement Agreement and Guaranty Agreement Obligations. If the Settlement Agreement and/or the Guaranty Agreements are determined not to be executory contracts, the BP Settlement Agreement Party determines to reject the Settlement Agreement and the Guaranty Agreements, or the BP Settlement Agreement Party is otherwise not authorized to make payments under the Settlement Agreement and the Guaranty Agreements, then a bankruptcy of the BP Settlement Agreement Party could result in long delays and possibly in large reductions in the amount of Pledged Funds available to pay Series 2016 Bondholders because, under the Bankruptcy Code, the obligations of the BP Settlement Agreement Party under the Settlement Agreement and the Guaranty Agreements could be modified or discharged in their entirety. For example, the bankruptcy court may approve a plan of reorganization or liquidation of the BP Settlement Agreement Party that alters the timing or the amount of payments to be made by the BP Settlement Agreement Party under the Settlement Agreement and the Guaranty Agreements to the State (and, thus, to the Authority, the State Treasurer and Bondholders). Enforcement of Rights to BP Settlement Revenues The Bond Resolution and the Enabling Law that appropriate and pledge the BP Settlement Revenues to the Authority and authorize the Authority to issue bonds secured by those revenues form a contract with Bondholders. It is possible that the State could in the future attempt to claim some or all of the Pledged Funds for itself, or otherwise interfere with the security for the Series 2016 Bonds. In that event, the Bondholders, the State Treasurer or the Authority could assert claims based on contractual or constitutional rights. The contract clause of the Alabama Constitution prohibits a future Alabama legislature from enacting legislation which would impair the contract between the Authority and the Bondholders. See SECURITY Covenants with Respect to Appropriated Funds and the Settlement Agreement. Under Alabama law, settlements are treated as contracts and may be enforced according to their terms. The Settlement Agreement became effective upon entry of a Consent Decree and Final Judgment in the United States District Court for the Eastern District of Louisiana on April 4, The Settlement Agreement is a court-approved settlement of lawsuits that establishes the State s right to receive the BP Settlement Revenues. If the State violates the provisions of the Settlement Agreement, the State Treasurer, as assignee of the Authority s rights to the BP Settlement Revenues, could seek to compel the State to enforce its payment rights under the Settlement Agreement. As interested parties, the Authority on its own behalf and the State Treasurer on behalf of the Bondholders could also seek to enforce the State s rights under the Settlement Agreement, although, as third parties to the Settlement Agreement, their rights to do so are uncertain. Based on the U.S. Supreme Court s standard of review for Contract Clause challenges in Energy Reserves Group, Inc. v. Kansas Power Light Co., 459 U.S. 400 (1983), the State must justify the exercise of its inherent police power to safeguard the vital interests of its people before the State may alter the Settlement Agreement or the financing arrangements in a manner that would substantially impair the rights of the Bondholders to be paid from the Pledged Funds. In those instances, however, where a state s own contractual obligations involving financing will be substantially impaired, the U.S. Supreme Court applies a stricter standard of judgment to a state s actions due to the risk that a state s self-interest rather than any public necessity will be the motivation for its actions. Indeed, in United States Trust Company of New York v. New Jersey, 431 U.S. 1 (1977), the U.S. Supreme Court noted that only once in an entire century had the U.S. Supreme Court upheld the alteration of a municipal bond contract. Thus, in order to justify the enactment by the State of legislation that substantially impairs the contractual rights of the Bondholders to be paid from the Pledged Funds, the State not only must demonstrate a significant and legitimate 18

34 public purpose, such as the remedying of a broad and general social or economic problem, but also must demonstrate that its actions under such circumstances satisfy the U.S. Supreme Court s strict standard of judgment employed in United States Trust Company and also that the impairment of the Bondholder s rights are based upon reasonable conditions and are of a character appropriate to the public purpose justifying the legislation s adoption. Finally, Bondholders may also have constitutional claims under the due process clauses of the United States Constitution and the State Constitution. FORWARD-LOOKING STATEMENTS Certain statements contained in this Official Statement including, without limitation, statements containing the words estimates, believes, anticipates, expects, and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Authority or other entities, or payment of BP Settlement Revenues, to which the forward-looking statements relate to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Authority. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Authority and the Underwriters disclaim any obligation to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments. THE AUTHORITY The Authority was created pursuant to the Enabling Law as a public corporation and instrumentality of the State. The members of the Authority are the Governor, the State Treasurer, the Speaker of the House of Representatives of the State, the President Pro Tempore of the State Senate, the Secretary of Labor of the State, and the Director of Finance of the State. The Enabling Law provides that the president, vice president, and secretary of the Authority shall be elected by the members of the Authority. General CONTINUING DISCLOSURE UNDERTAKING In order to assist the Underwriters in complying with the provisions of Rule 15c2-12 (the Rule ) of the Securities and Exchange Commission ( SEC ) promulgated under the Securities Exchange Act of 1934, as amended (the 1934 Act ), for the benefit of the holders and beneficial owners of the Series 2016 Bonds, the Authority will enter into an undertaking to provide continuing disclosure (the Continuing Disclosure Agreement ). Pursuant to the Continuing Disclosure Agreement, the Authority will provide to the Electronic Municipal Market Access System (EMMA) established pursuant to the Rule and implemented by the Municipal Securities Rulemaking Board (the MSRB ), or any successor thereto or to the functions of the MSRB, core financial information and operating data of the Authority for the prior fiscal year as follows: (a) In the event the Authority produces annual financial statements or its financial statements are included as a component of the State s audited financial statements, within nine (9) months after the end of each fiscal year, the Authority s audited financial statements or excerpts from the State s audited financial statements 19

35 concerning the Authority, incorporating the financial position and financial results of the Authority, prepared in accordance with generally accepted accounting principles in effect from time to time; (b) within nine (9) months after the end of each fiscal year, (i) the BP Settlement Revenues received by the State for the prior April 4 payment date, (ii) the relationship of BP Settlement Revenues received for such payment date to the debt service for the Series 2016 Bonds and any Additional Bonds due on the September 15 and March 15 following such payment date, and (iii) balances of the Debt Service Fund as of the end of the previous fiscal year; (c) in a timely manner not in excess of 10 business days after the occurrence of the event, notice of the occurrence of any of the following events affecting the Series 2016 Bonds: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults (if material); (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or failure of any such provider to perform; (6) Adverse tax opinions or events affecting the tax-exempt status of the Series 2016 Bonds; (7) Modifications to rights of holders of Series 2016 Bonds (if material); (8) Calls for redemption of any of the Series 2016 Bonds (if material); (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Series 2016 Bonds (if material); (11) Rating changes; (12) The issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series 2016 Bonds; (13) Tender offers; (14) Bankruptcy, insolvency, receivership or similar event of the obligated person; (15) The consummation of a merger, consolidation, or acquisition, or certain asset sales, involving the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms (if material); (16) Appointment of a successor or additional trustee or the change of name of a trustee (if material); and (d) in a timely manner, notice of a failure to provide by the date set forth in paragraph (a) or (b) above any of the annual information required by such paragraphs. The Authority will not undertake to provide any notice with respect to (i) credit enhancement if the credit enhancement is added after the primary offering of the Series 2016 Bonds, the Authority does not apply for or participate in obtaining the enhancement and the enhancement is not described in this Official Statement or (ii) tax exemption other than pursuant to Section 103 of the Code. 20

36 The Authority will not undertake to provide the above-described event notice of a mandatory scheduled redemption, not otherwise contingent upon the occurrence of an event, if (i) the terms, dates and amounts of redemption are set forth in detail herein, (ii) the only open issue is which Series 2016 Bonds will be redeemed in the case of a partial redemption, (iii) notice of redemption is given to the Bondholders as required under the terms of the Series 2016 Bonds and (iv) public notice of the redemption is given pursuant to 1934 Act Release No of the SEC, even if the originally scheduled amounts are reduced by prior optional redemptions or Series 2016 Bond purchases. An amendment to the Continuing Disclosure Agreement may only take effect if: (a) the amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the Authority, or type of business conducted; the Continuing Disclosure Agreement, as amended, would have complied with the requirements of the Rule at the time of sale of the Series 2016 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and the amendment does not materially impair the interests of Bondholders, as determined by parties unaffiliated with the Authority (such as, but without limitation, the Authority s financial advisor or bond counsel) and the annual financial information containing (if applicable) the amended operating data or financial information will explain, in narrative form, the reasons for the amendment and the impact (as that word is used in the letter from the SEC staff to the National Association of Bond Lawyers dated June 23, 1995) of the change in the type of operating data or financial information being provided; or (b) all or any part of the Rule, as interpreted by the staff of the SEC at the date of the Series 2016 Bonds, ceases to be in effect for any reason, and the Authority elects that the Continuing Disclosure Agreement shall be deemed terminated or amended (as the case may be) accordingly. LITIGATION There is no litigation pending in any court (either state or federal) to restrain or enjoin the issuance or delivery of the Series 2016 Bonds or questioning the creation, organization or existence of the Authority, the validity or enforceability of the Bond Resolution, or the Enabling Law, the proceedings for the authorization, execution, authentication and delivery of the Series 2016 Bonds or the validity of the Series 2016 Bonds. For a discussion of other legal matters, including certain pending litigation involving the Settlement Agreement and the BP Settlement Agreement Parties, see RISK FACTORS and LEGAL CONSIDERATIONS herein. Series 2016-A Bonds TAX MATTERS Under existing law, the tax status of the Series 2016-A Bonds will include the following characteristics: Federal Tax-Exempt Status of the Series 2016-A Bonds Interest on the Series 2016-A Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code ), if the Authority complies with all requirements of the Internal Revenue Code that must be satisfied subsequent to the issuance of the Series 2016-A Bonds in order that interest thereon be and remain excluded from gross income. Failure to comply with such requirements could cause the interest on the Series 2016-A Bonds to be included in gross income, retroactive to the date of issuance of the Series 2016-A Bonds. The Authority has covenanted to comply with all such requirements. Federal Tax Preference Treatment Interest on the Series 2016-A Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest will be taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. 21

37 State Tax-Exempt Status Interest on the Series 2016-A Bonds will be exempt from State of Alabama income taxation. Certain Collateral Federal Tax Consequences Holders and prospective purchasers of the Series 2016-A Bonds should be aware that the ownership of the Series 2016-A Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty and life insurance companies, individual recipients of Social Security or railroad retirement benefits, certain S corporations with excessive net passive income, foreign corporations subject to a branch profits tax, other foreign persons and organizations, life insurance companies, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry the Series 2016-A Bonds. Prospective purchasers of the Series 2016-A Bonds should consult their tax advisors as to whether the collateral tax consequences described in this paragraph or other tax consequences may be applicable to their financial situation. Information Reporting and Backup In addition to other types of income, information reporting requirements apply to interest on tax-exempt obligations, including the Series 2016-A Bonds. In general, such requirements are satisfied if the recipient of payments of interest provides the payor with a completed IRS Form W-9, Request for Taxpayer Identification Number and Certification, or if such recipient is one of a limited class of persons exempt from information reporting. Foreign persons and organizations and other non-u.s. holders may be asked or required to provide an appropriate completed IRS Form W-8 in lieu of Form W-9 in order to establish their U.S. tax status. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to backup withholding, which means that the payor is required to deduct and withhold a tax from each interest payment received, calculated in the manner set forth in the Internal Revenue Code. For the foregoing purpose, a payor generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient, such as a broker-dealer or bank. If a prospective purchaser considering buying a Series 2016-A Bond through a brokerage account has executed a Form W-9 (or Form W-8 where appropriate) in connection with the establishment of such account, as generally can be expected, no backup withholding should occur, unless such prospective purchaser is for another reason, subject to backup withholding. Whether or not a prospective purchaser is subject to backup withholding does not affect the exclusion of interest on the Series 2016-A Bonds from gross income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner s Federal income tax once the required information is furnished to the Internal Revenue Service. Prospective purchasers of the Series 2016-A Bonds should consult their tax advisors as to whether backup withholding may be applicable to their financial situation. Opinion of Bond Counsel The form of Bond Counsel s opinion with respect to the Series 2016-A Bonds is expected to be substantially as set forth in APPENDIX C attached to this Official Statement. The opinion of Bond Counsel expresses the professional judgment of Bond Counsel relating to the legal issues explicitly addressed therein. By rendering the opinion, Bond Counsel does not become an insurer or guarantor of an expression of professional judgment of the transaction opined upon, or of the future performance of parties to such transaction, and the rendering of such opinion does not guarantee the outcome of any legal dispute that may arise in connection with the transaction. Original Issue Discount Under existing law, the original issue discount in the selling price of a Series 2016-A Bond, to the extent properly allocable to each holder of such Series 2016-A Bond, is excludable from gross income for federal income tax purposes with respect to such holder. The original issue discount is the excess of the stated redemption price at maturity of such Series 2016-A Bond over its initial offering price to the public, excluding underwriters and other 22

38 intermediaries, at which price a substantial amount of the Series 2016-A Bonds of such series and maturity were sold. Under Section 1288 of the Internal Revenue Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to a holder of a Series 2016-A Bond during any accrual period generally equals (i) the issue price of such Series 2016-A Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Series 2016-A Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (iii) any interest payable on such Series 2016-A Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the holder s tax basis in such Series 2016-A Bond. Purchasers of any Series 2016-A Bond at an original issue discount should consult their tax advisors regarding the determination and treatment of original issue discount for federal income tax purposes, and with respect to state and local tax consequences of owning such Series 2016-A Bond. Original Issue Premium An amount equal to the excess of the purchase price of a Series 2016-A Bond over its stated redemption price at maturity constitutes premium on such Series 2016-A Bond. A purchaser of a Series 2016-A Bond must amortize any premium over such Series 2016-A Bond s term using constant yield principles, based on the Series 2016-A Bond s yield to maturity. As premium is amortized, the purchaser s basis in such Series 2016-A Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to such purchaser. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of such Series 2016-A Bond prior to its maturity. Even though the purchaser s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2016-A Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult their tax advisors with respect to the determination and treatment of premium for federal income tax purposes, and with respect to state and local tax consequences of owning such Series 2016-A Bonds. Other Considerations The foregoing discussion does not address the effects of any applicable federal income, state, local or foreign tax laws other than those specifically discussed above. Prospective purchasers are urged to consult their own tax adviser concerning the federal income tax consequences of owning and disposing of the Series 2016-A Bonds, as well as any consequences under the laws of any state, local or foreign taxing jurisdiction. See RISK FACTORS Tax-Exempt Status of Series 2016-A Bonds herein for a discussion of certain risk factors relating to investment in the Bonds. No Bank Qualification Any financial institution purchasing any of the Series 2016-A Bonds should note that such obligations will not qualify as qualified tax-exempt obligations under Section 265(b)(3) of the Internal Revenue Code with respect to the deduction of interest costs attributable to carrying or purchasing the Series 2016-A Bonds. Series 2016-B Bonds Interest on the Series 2016-B Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code. In the opinion of Bond Counsel, under existing law, interest on the Series 2016-B Bonds will be exempt from State of Alabama income taxation. Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Series 2016-B Bonds. The proposed form of opinion of Bond Counsel is contained in APPENDIX C attached hereto. The following discussion summarizes certain U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the Series 2016-B Bonds that acquire their Series 2016-B Bonds in the initial 23

39 offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the Internal Revenue Service with respect to any of the U.S. federal income tax consequences discussed below, and no assurance can be given that the Internal Revenue Service will not take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their Series 2016-B Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors whose functional currency is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax consequences, (ii) the net investment income tax imposed under Section 1411 of the Internal Revenue Code, or (iii) the indirect effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of the Series 2016-B Bonds under state, local or non-u.s. tax laws. In addition, this summary generally is limited to U.S. tax considerations applicable to investors that acquire their Series 2016-B Bonds pursuant to this offering for the issue price that is applicable to such Series 2016-B Bonds (i.e., the price at which a substantial amount of the Series 2016-B Bonds are sold to the public) and who will hold their Series 2016-B Bonds as capital assets within the meaning of Section 1221 of the Internal Revenue Code. The following discussion does not address tax considerations applicable to any investors in the Series 2016-B Bonds other than investors that are U.S. Holders. As used herein, U.S. Holder means a beneficial owner of a Series 2016-B Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). If a partnership holds Series 20l6-B Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partnerships holding Series 2016-B Bonds, and partners in such partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the Series 2016-B Bonds (including their status as U.S. Holders). Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local or non-u.s. tax consequences to them from the purchase, ownership and disposition of the Series 2016-B Bonds in light of their particular circumstances. Interest. Interest on the Series 2016-B Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder s method of accounting for U.S. federal income tax purposes. To the extent that the issue price of any maturity of the Series 2016-B Bonds is less than the amount to be paid at maturity of such Series 2016-B Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2016-B Bonds) by more than a de minimis amount, the difference may constitute original issue discount ( OID ). U.S. Holders of Series 2016-B Bonds will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S. Holders generally will be required to include in income increasingly greater amounts of OID in successive accrual periods. Series 2016-B Bonds purchased for an amount in excess of the principal amount payable at maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a Series 2016-B Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Series 2016-B Bond. 24

40 Sale or Other Taxable Disposition of the Series 2016-B Bonds. Unless a nonrecognition provision of the Internal Revenue Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the Authority) or other disposition of a Series 2016-B Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of a Series 2016-B Bond will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Series 2016-B Bond, which will be taxed in the manner described above) and (ii) the U.S. Holder s adjusted U.S. federal income tax basis in the Series 2016-B Bond (generally, the purchase price paid by the U.S. Holder for the Series 2016-B Bond, decreased by any amortized premium). Any such gain or loss generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the Series B Bonds, the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder s holding period for the Series 2016-B Bonds exceeds one year. The deductibility of capital losses is subject to limitations. Defeasance of the Series 2016B Bonds. If the Authority defeases any Series 2016-B Bond, such Series 2016-B Bond may be deemed to be retired and reissued for federal income tax purposes as a result of the defeasance. In that event, in general, a U.S. Holder will recognize taxable gain or loss equal to the difference between (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and (ii) the U.S. Holder s adjusted tax basis in the Series 2016-B Bond. Information Reporting and Backup Withholding. Payments on the Series 2016-B Bonds generally will be subject to U.S. information reporting and possibly to backup withholding. Under Section 3406 of the Internal Revenue Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of the Series 2016-B Bonds may be subject to backup withholding at the current rate of 28% with respect to reportable payments, which include interest paid on the Series 2016-B Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Series 2016-B Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number ( TIN ) to the payor in the manner required, (ii) the Internal Revenue Service notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a notified payee underreporting described in Section 3406(c) of the Internal Revenue Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(l)(C) of the Internal Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain U.S. holders (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. A holder s failure to comply with the backup withholding rules may result in the imposition of penalties by the Internal Revenue Service. Foreign Account Tax Compliance Act ( FATCA ) Sections 1471 through 1474 of the Internal Revenue Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.- owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial U.S. owner. Failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest and principal under the Series 2016-B Bonds and sales proceeds of Series 2016-B Bonds held by or through a foreign entity. In general, withholding under FATCA currently applies to payments of U.S. source interest (including OID) and, under current Treasury Regulations, will apply to (i) gross proceeds from the sale, exchange or retirement of debt obligations paid after December 31, 2016 and (ii) certain passthru payments no earlier than January 1, However, the U.S. Treasury Department recently stated its intention to revise the current U.S. Treasury Regulations regarding FATCA to provide that withholding under FATCA generally will apply to (i) gross proceeds from the sale, exchange or retirement of debt obligations paid after December 31, 2018 and (ii) certain passthru payments no earlier than January 1, Prospective investors should consult their own tax advisors regarding FATCA and its effect on them. 25

41 The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal taxation that may be relevant to a particular holder of Series 2016-B Bonds in light of the holder s particular circumstances and income tax situation. Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of Series 2016-B Bonds, including the application and effect of state, local, non-u.s., and other tax laws. RATINGS It is a condition to the obligation of the Underwriters to purchase the Series 2016 Bonds that, at the date of delivery thereof to the Underwriters, the Series 2016 Bonds be assigned a rating of A2 (Positive Outlook) by Moody s and a rating of A- (Stable Outlook) by S&P. A credit rating is not a recommendation to buy, sell or hold securities, and such rating may be subject to revision or withdrawal at any time. The ratings of the Series 2016 Bonds reflect only the views of the applicable rating agency and any desired explanation of the significance of such rating and any outlook or other statements given by such rating agency with respect thereto should be obtained from Moody s or S&P, as applicable. Except as may be required by the Continuing Disclosure Agreement described above under the heading CONTINUING DISCLOSURE UNDERTAKING, the Authority undertakes no responsibility either to bring to the attention of the owners of the Series 2016 Bonds any proposed change in or withdrawal of such ratings or to oppose any such revision or withdrawal. There is no assurance that the initial ratings assigned to the Series 2016 Bonds will continue for any given period of time or that such ratings will not be revised downward, suspended or withdrawn entirely by the applicable rating agency. Any such downward revision, suspension or withdrawal of such rating may have an adverse effect on the availability of a market for or the market price of the Series 2016 Bonds. UNDERWRITING The underwriters listed on the cover page of this Official Statement (the Underwriters ), will enter into a bond purchase contract in which (i) the Underwriters will agree to purchase the Series 2016-A Bonds, subject to certain conditions precedent, at a purchase price of $ (face amount less/plus original issue discount/premium of $ and less underwriters discount of $ ) and (ii) the Underwriters will agree to purchase the Series 2016-B Bonds, subject to certain conditions precedent, at a purchase price of $ (face amount less/plus original issue discount/premium of $ and less underwriters discount of $ ). The Underwriters will purchase all of the Series 2016-A Bonds if any are purchased, and all of the Series 2016-B Bonds if any are purchased. The Underwriters may offer the Series 2016 Bonds to certain dealers (including dealers depositing the Series 2016 Bonds in unit investment trusts, certain of which may be sponsored or managed by the Underwriters) and others at a price lower than that offered to the public. Under the bond purchase agreement, the Authority will agree to indemnify the Underwriters against certain costs, claims and liabilities, including certain liabilities arising under the Securities Act of 1933 and the Securities Exchange Act of Morgan Stanley & Co. LLC, an underwriter of the Series 2016 Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Series 2016 Bonds. FINANCIAL ADVISOR Rice Advisory, LLC, Montgomery, Alabama, has acted as Financial Advisor to the Authority in connection with the issuance of the Series 2016 Bonds. Although the Financial Advisor assisted in the preparation of this Official Statement, it is not obligated to undertake, and has not agreed to make, an independent verification or to 26

42 assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. LEGAL MATTERS Balch & Bingham LLP, Birmingham, Alabama, Bond Counsel, will render an opinion with respect to the validity of the Series 2016 Bonds in substantially the form set forth in APPENDIX C attached hereto. Certain legal matters will be passed upon for the Authority by Butler Snow LLP, Birmingham, Alabama, as Disclosure Counsel. AUTHORIZATION AND APPROVAL This Official Statement and the distribution of this Official Statement have been duly authorized by the Authority. ALABAMA ECONOMIC SETTLEMENT AUTHORITY By: Secretary 27

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44 APPENDIX A FORM OF BOND RESOLUTION

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46 A RESOLUTION AUTHORIZING THE ISSUANCE OF BP SETTLEMENT REVENUE BONDS, SERIES 2016-A AND TAXABLE BP SETTLEMENT REVENUE BONDS, SERIES 2016-B Adopted by Alabama Economic Settlement Authority on, 2016

47 TABLE OF CONTENTS ARTICLE I DEFINITIONS...1 Definitions and Use of Phrases...1 ARTICLE II REPRESENTATIONS AND WARRANTIES...9 Findings, Representations and Warranties....9 ARTICLE III DESCRIPTION OF THE SERIES 2016-A BONDS...10 Authorization of Series 2016-A Bonds Authorized Denominations; Form and Number Date; Interest Form of the Series 2016-A Bonds ARTICLE IV DESCRIPTION OF THE SERIES 2016-B BONDS...17 Authorization of Series 2016-B Bonds Authorized Denominations; Form and Number Date; Interest Form of the Series 2016-B Bonds ARTICLE V EXECUTION, REGISTRATION, TRANSFER, PAYMENT OF BONDS...24 Execution and Authentication Registration and Transfer Mutilated, Destroyed, Lost and Stolen Bonds Payment of Interest on Bonds; Interest Rights Preserved Persons Deemed Owners Payments Due on a Day Other than a Business Day Cancellation Book-Entry Only System; Payment Provisions ARTICLE VI REDEMPTION OF BONDS...29 Optional Redemption...29 Mandatory Redemption Election to Redeem Selection by State Treasurer of Bonds to be Redeemed Notice of Redemption Deposit of Redemption Price Bonds Payable on Redemption Date Bonds Redeemed in Part ARTICLE VII SOURCE OF PAYMENT...34 Source of Payment for Bonds; Pledge of Pledged Funds; Pledge of Capitalized Interest Funds for Certain Bonds Issuance of Additional Bonds Provision for Payment of Bonds i

48 ARTICLE VIII SALE AND DELIVERY OF BONDS; DISPOSITION OF PROCEEDS; OFFICIAL STATEMENT AND OTHER DOCUMENTS...39 Sale of Bonds Disposition of Proceeds from the Sale of the Bonds...39 Official Statement and Other Documents ARTICLE IX CONCERNING THE STATE TREASURER, DEPOSITORIES AND PAYMENT AGENT...42 Concerning the State Treasurer Appointment of Depositories Resignation of Depositories Removal of Depositories Successor Depositories State Treasurer to Hold Monies in Trust ARTICLE X CERTAIN FUNDS AND ACCOUNTS...44 Debt Service Fund District 91 Project Fund District 92 Project Fund Alabama Medicaid Agency Fund...47 Series 2016-A Capitalized Interest Fund Series 2016-B Capitalized Interest Fund Cost of Issuance Fund Rebate Fund Funds Held by State Treasurer as Paying Agent ARTICLE XI AMENDMENT OR MODIFICATIONS OF THE RESOLUTION...52 Supplemental Resolutions Without Bondholder Consent Supplemental Resolutions Requiring Bondholder Consent Notices with Respect to Certain Changes in Resolution...53 Favorable Tax Opinion Required...53 ARTICLE XII REPRESENTATIONS AND COVENANTS...54 General Representations Payment of Bonds Accounts Corporate Existence...55 Covenants with Respect to Appropriated Funds and Settlement Agreement ARTICLE XIII EVENTS OF DEFAULT...57 Events of Default Defined Remedies on Default Delay No Waiver ARTICLE XIV MISCELLANEOUS...58 ii

49 Tax Matters Authorization of Continuing Disclosure Agreement and Related Documents and Actions Provisions of Resolution a Contract; Governing Law Confirmation of Professionals and Actions Taken in Connection with the Sale of the Bonds Severability Clause...59 Notices to Bondholders; Waiver Repeal of Conflicting Provisions...60 Limitation on Rights Corporate Seal Effect of Headings and Table of Contents Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Maturities, Amounts, Interest Rates and Prices/Yields Form of Bond Purchase Agreement District 91 Project Fund Requisition District 92 Project Fund Requisition Form of Continuing Disclosure Agreement iii

50 A RESOLUTION AUTHORIZING THE ISSUANCE OF BP SETTLEMENT REVENUE BONDS, SERIES 2016-A AND TAXABLE BP SETTLEMENT REVENUE BONDS, SERIES 2016-B BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE ALABAMA ECONOMIC SETTLEMENT AUTHORITY as follows: ARTICLE I DEFINITIONS Definitions and Use of Phrases. For all purposes of this Resolution, except as otherwise expressly provided or unless the context otherwise requires: (i) The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular, and vice versa. The terms "herein", "hereof" and "hereunder" and other words of similar import refer to this Resolution as a whole and not to any particular Article, Section or other subdivision. "Additional Bonds" shall mean any bonds or other obligations of the Authority that are hereafter issued in accordance with the provisions of Section 7.2 hereof, and that are secured by the Pledged Funds on a parity of lien with the Bonds. "Adjusted Treasury Rate" means, when determining the Make-Whole Redemption Price for Series 2016-B Bonds, the yield to maturity of United States Treasury securities (excluding inflation-indexed securities) with a constant maturity most nearly equal to the period from the redemption date to the maturity date of the Series 2016-B Bonds to be redeemed; provided, however, that if the period from the redemption date to such maturity date is less than one year, a constant maturity of one year will be used. The yield to maturity on the United States Treasury securities shall be determined by reference to Federal Reserve Statistical Release H.15, as published on the most recent date that is at least two Business Days prior to the redemption date, or, if such Release is no longer published, by reference to such publicly available index as the Calculation Agent, in its judgment, shall deem reasonably comparable. "Alabama Department of Transportation" shall mean the Alabama Department of Transportation, an agency of the State, and includes its successors and assigns. "Alabama Trust Fund" shall mean the trust fund of the State created under Amendment 450 to the Constitution of Alabama of 1901, as amended, and appearing as of the Official Recompilation of the Constitution of Alabama 1901, as amended. "Annual Debt Service" shall mean, as of the date of any determination thereof, the aggregate amount of principal and interest payable during a Settlement Payment Year on the Bonds and Additional Bonds then Outstanding (and that will continue to be Outstanding 1

51 immediately after the issuance of the Additional Bonds then proposed to be issued), and the Additional Bonds then proposed to be issued; provided, that for purposes of this definition: (1) there shall be excluded any principal of or interest on any of the Bonds or Additional Bonds to the extent that there are available and held in escrow or under a trust agreement for their payment (i) moneys, sufficient to pay such principal or interest when due, (ii) Federal Securities (that are not subject to redemption prior to maturity at the option of the issuer) which, if the principal thereof and the interest thereon are paid according to their terms, will produce moneys sufficient to pay such principal and interest when due, or (iii) both moneys and Federal Securities (that are not subject to redemption prior to maturity at the option of the issuer) which together will produce funds sufficient to pay such principal and interest when due; and (2) the principal amount of the Bonds and Additional Bonds subject to scheduled mandatory redemption in any Settlement Payment Year shall be deemed to be payable in such Settlement Payment Year rather than the Settlement Payment Year of their stated maturity. "Annual Settlement Agreement Revenues" shall mean the revenues received or to be received by the State pursuant to the Settlement Agreement for a Settlement Payment Year. "Appropriated Funds" shall mean the BP Settlement Revenues deposited in the BP Settlement Fund, and any investment earning thereon, that are pledged and appropriated pursuant to the Enabling Law to the payment of the principal, interest and premium (if any) on the Authority's bonds, to redeem such bonds prior to maturity if called for redemption by the Authority, and to pay the principal of, the interest, and premium (if any) on any refunding bonds issued to refund such bonds. "Authority" shall mean the Alabama Economic Settlement Authority, a public corporation and instrumentality of the State created pursuant to the Enabling Law. "Authorized Denomination" shall mean a denomination of $5,000 or, any multiple thereof. "Authorized Alabama Department of Transportation Representative" shall mean the Director of the Alabama Department of Transportation, the Chief Financial Officer of the Alabama Department of Transportation, or any other person or persons at the time designated in writing as an "Authorized Alabama Department of Transportation Representative" by the President, Vice President or Secretary of the Authority. "Bond Counsel" shall mean any attorney or firm of attorneys who are acceptable to the Authority and whose opinions respecting the legality or validity of debt securities issued by or on behalf of states or political subdivisions thereof are nationally recognized and accepted. "Bond Payment Date" shall mean each date (including any date fixed for redemption of Bonds) on which Debt Service is payable on the Bonds. 2

52 "Bond Register" shall mean the register or registers for the registration and transfer of Bonds and Additional Bonds maintained by the State Treasurer pursuant to Section 5.2 hereof or pursuant to the provisions of any Supplemental Resolution under which Additional Bonds are issued. "Bond Year" shall mean the period commencing on September 1 of any calendar year and ending on August 31 of the following calendar year. "Bondholder" or "Holder", when used with respect to any Bond or Additional Bond, shall mean the person in whose name such Bond or Additional Bond is registered in the applicable Bond Register. "Bonds" shall mean the Series 2016-A Bonds and Series 2016-B Bonds, collectively. "BP Settlement Fund" shall mean the "BP Settlement Fund" created pursuant to the Enabling Law into which the BP Settlement Revenues are deposited upon receipt by the State. "BP Settlement Revenues" shall mean the revenues received by the State pursuant to the Settlement Agreement, whether such amounts are received from BP Exploration & Production, Inc., or from payment under the Primary Guaranty or Secondary Guaranty, or pursuant to any alternative financial assurance provided under Section 5.6 of the Settlement Agreement. "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which the office of the State Treasurer is authorized to be closed. "Calculation Agent" means an Independent person or firm retained by the Authority to determine the Make-Whole Redemption Price. The Calculation Agent shall have experience in making the computations required to determine the Make-Whole Redemption Price. "Code" shall mean the Internal Revenue Code of 1986, as amended, and all temporary or permanent regulations of the U.S. Department of the Treasury adopted thereunder. "Continuing Disclosure Agreement" shall mean the Continuing Disclosure Agreement dated the date of delivery of the Bonds and executed and delivered by the Authority in connection with the issuance of the Bonds. "Cost of Issuance" shall mean all the expenses of issuing the Bonds, including, without limitation, legal, financial advisor, accounting and underwriting fees and expenses, costs of printing, and rating fees and expenses. "Cost of Issuance Fund" shall mean the fund by that name established pursuant to Section 10.7 of this Resolution. "Debt Service" shall mean the principal, premium (if any), and interest payable on the Bonds and any Additional Bonds. 3

53 "Debt Service Fund" shall mean the debt service fund created pursuant to Section 10.1 of this Resolution. "Defaulted Interest" shall have the meaning stated in Section 5.4(b) of this Resolution. "Depository" shall mean a depository bank designated by the State Treasurer pursuant to the provisions of Section 9.2 of this Resolution. "Director of Finance" shall mean the Director of Finance of the State. "Directors" shall mean the Board of Directors of the Authority. "District 91 Project Fund" shall mean that special fund created and established pursuant to Section 10.2(a) hereof. "District 91 Project Fund Requisition" shall have the meaning given to such term in Section 10.2(b) hereof. "District 92 Project Fund" shall mean that special fund created and established pursuant to Section 10.3(a) hereof. "District 92 Project Fund Requisition" shall have the meaning given to such term in Section 10.3(b) hereof. "Enabling Law" shall mean Act No adopted during the 2016 First Special Session of the Alabama Legislature. "Favorable Tax Opinion" shall mean an unqualified Opinion of Bond Counsel stating in effect that the proposed action, together with any other changes with respect to the Series 2016-A Bonds made or to be made in connection with such action, will not cause interest on any of the Series 2016-A Bonds to become includible in gross income of the respective holders thereof for federal income tax purposes. "Federal Securities" shall mean direct obligations of, or obligations the payment of which is guaranteed by, the United States of America. "Fiscal Year" shall mean the period beginning on October 1 of any year and ending on September 30 of the next succeeding year, or such other fiscal year as may hereafter be adopted by the Authority. "Government Securities" shall mean any bonds or other obligations, the principal of and interest on which constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including obligations of any federal agency to the extent such obligations are unconditionally guaranteed by the United States of America and any certificates or other evidences of an ownership interest in such obligations of, or unconditionally guaranteed by, the United States of America or in specified portions thereof, which may constitute the principal thereof of the interest thereon. 4

54 "Governor" shall mean the Governor of the State. "Gulf States" shall mean the States of Alabama, Florida, Louisiana, Mississippi, and Texas and certain affiliates described in the Settlement Agreement. "Independent" shall mean a person or firm not regularly employed full-time by the Authority or the State. "Interest Payment Date" shall mean each March 15 and September 15, commencing March 15, "Make-Whole Redemption Price" shall mean, when used with respect to the Series 2016-B Bonds (or any portion thereof) to be redeemed pursuant to the optional redemption provisions hereof, the greater of: (i) 100% of the principal amount of the Series 2016-B Bonds (or portion thereof) to be redeemed, or (ii) the present value of the remaining scheduled payments of principal and interest to the maturity date of the Series 2016-B Bonds (or portion thereof), not including interest accrued and unpaid as of the redemption date, discounted to the redemption date at the Adjusted Treasury Rate plus basis points, such discounting to be on a semiannual basis assuming a 360-day year consisting of twelve 30-day months. The Make-Whole Redemption Price shall be determined and certified to the State Treasure by the Calculation Agent. "Moody's" shall mean Moody's Investors Service, Inc. "Opinion of Bond Counsel" shall mean an opinion of Bond Counsel acceptable to the Authority with experience in matters covered in the opinion. "Outstanding" when used with respect to the Bonds or any Additional Bonds, shall mean, as of the date of determination, all such debt obligations authenticated and delivered, except: (a) Debt obligations cancelled by the State Treasurer or delivered to the State Treasurer for cancellation; (b) Debt obligations for whose payment or redemption cash and/or Federal Securities in the necessary amount has been deposited with the State Treasurer or with one or more trustees or escrow agents, as provided in this Resolution or under the resolution, indenture or other document under which such obligations were issued, for the Holders of such debt obligations, provided that, if such debt obligations are to be redeemed, notice of such redemption has been duly given pursuant to the authorizing resolution or provision therefor satisfactory to the State Treasurer has been made; and (c) Debt obligations in exchange for or in lieu of which other debt obligations have been registered and delivered under the resolution, indenture or other document authorizing their issuance. "Pledged Funds" shall mean (i) the Appropriated Funds and (ii) moneys and investments held in the Debt Service Fund. 5

55 "Permitted Investments" shall mean (1) Government Securities, (2) bonds, debentures, notes, or other evidences of indebtedness issued by any of the following agencies: Bank for Cooperatives; federal intermediate credit banks; Federal Financing Bank; federal home loan banks; Federal Farm Credit Bank; Export-Import Bank of the United States; federal land banks; or Farmers Home Administration or any other agency or corporation which has been or may hereafter be created by or pursuant to an act of the Congress of the United States as an agency or instrumentality thereof; (3) bonds, notes, pass through securities or other evidences of indebtedness of the Government National Mortgage Association and participation certificates of the Federal Home Loan Mortgage Corporation; (4) full faith and credit obligations of any state, provided that at the time of purchase such obligations are rated at least "AA" by Standard & Poor's Ratings Group and at least "Aa" by Moody's Investors Service; (5) public housing bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by contracts with the United States of America, or temporary notes, preliminary notes, or project notes issued by public agencies or municipalities, in each case fully secured as to the payment of both principal and interest by contracts with the United States of America, or temporary notes, preliminary notes or project notes issued by public agencies or municipalities, in each case fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America; (6) time deposits evidenced by certificates of deposit issued by banks or savings and loan associations which are members of the Federal Deposit Insurance Corporation, provided that, to the extent such time deposits are not covered by federal deposit insurance, such time deposits (including interest thereon) are fully secured by a pledge of obligations described in items (1), (2), (3), and (5) above, which at all times have a market value not less than the amount of such bank time deposits required to be so secured and which meet the greater of 100 percent collateralization or the "AA" collateral levels established by Standard & Poor's Ratings Group for structured financings; (7) repurchase agreements for obligations of the type specified in items (1), (2), (3), and (5) above, provided such repurchase agreements are fully collateralized and secured by such obligations which have a market value at least equal to the purchase price of such repurchase agreements which are held by a depository satisfactory to the State Treasurer in such manner as may be required to provide a perfected security interest in such obligations, and which meet the greater of 100 percent collateralization or the "AA" collateral levels established by Standard & Poor's Ratings Group for structured financings; and (8) uncollateralized investment agreements with, or certificates of deposit issued by, banks or bank holding companies, the senior long-term securities of which are rated at least "AA" by Standard & Poor's Ratings Group and at least "Aa" by Moody's Investors Service. "Primary Guaranty" shall mean the Primary Guaranty by BP Corporation North America Inc. in Favor of the State of Alabama, pursuant to which BP Corporation North America Inc. has guaranteed the payment of the amounts due to the State under the Settlement Agreement. "Rainy Day Account" shall mean the General Fund Rainy Day Account of the Alabama Trust Fund created by Amendment 803 to the Constitution of Alabama of 1901, as amended, and appearing as of the Official Recompilation of the Constitution of Alabama 1901, as amended. 6

56 "Rebate Consultant" shall mean an employee of the State or a department or agency thereof or a financial consultant that the Authority directs to make the determination of the Required Rebate, if any, required to be made pursuant to the provisions of the Code. "Rebate Fund" shall mean that certain fund created and established pursuant to Section 10.8 hereof. "Regular Record Date" for the interest payable on any Interest Payment Date on the Bonds shall mean the date specified in Section 5.4(a). "Required Rebate" shall mean the amount, if any, that is required by the provisions of Section 148(f) of the Code and applicable regulations thereunder, to be paid by the Authority to the United States of America in order that the Series 2016-A Bonds shall not be treated as "arbitrage bonds" within the meaning of Section 103(b)(2) and Section 148 of the Code. "Resolution" shall mean a resolution adopted by the governing body of the Authority. "S&P" shall mean Standard & Poor's Global Ratings, a business unit of Standard & Poor's Financial Services, LLC. "Secondary Guaranty" shall mean the Secondary Guaranty by BP p.l.c. in Favor of the State of Alabama, pursuant to which BP p.l.c. has guaranteed the payment of the amounts due to the State under the Settlement Agreement. "Series 2016-A Bonds" shall mean the $ BP Settlement Revenue Bonds, Series 2016-A, dated their date of delivery, and authorized to be issued under this Resolution. "Series 2016-A Capitalized Interest Fund" shall mean the Series 2016-A Capitalized Interest Fund created pursuant to Section 10.5 of this Resolution. "Series 2016-B Bonds" shall mean the $ Taxable BP Settlement Revenue Bonds, Series 2016-B, dated their date of delivery, and authorized to be issued under this Resolution. "Series 2016-B Capitalized Interest Fund" shall mean the Series 2016-B Capitalized Interest Fund created pursuant to Section 10.6 of this Resolution. "Settlement Agreement" shall mean that certain "Settlement Agreement Between the Gulf States and the BP Entities with Respect to Economic and Other Claims Arising from the Deepwater Horizon Incident", between the Gulf States, BP p.l.c., BP Corporation North America Inc., and BP Exploration & Production Inc., entered into in connection with settlement of economic damages claims of the State against BP Exploration & Production, Inc. (and corporate affiliates) arising out of the Deepwater Horizon oil spill in the Gulf of Mexico. "Settlement Payment Year" shall mean a one year period beginning on April 4 (the date the annual payments are due to the State under the Settlement Agreement) of any calendar year and ending on April 3 of the following calendar year. 7

57 "Special Record Date" for the payment of any Defaulted Interest on Bonds shall mean the date fixed by the State Treasurer pursuant to Section 5.4(b) hereof. "State" shall mean, when not used as a portion of a name, the State of Alabama. "State Treasurer" shall mean the Treasurer of the State. "Supplemental Resolution" shall mean any resolution of the Directors supplemental hereto or pursuant to which the Authority shall issue obligations constituting Additional Bonds. "Tax Compliance Agreement" shall mean that certain Tax Compliance Agreement entered into by the Authority in connection with the issuance of the Bonds. "Transportation Projects" shall mean any undertaking to construct a particular portion of a highway located in Alabama Department of Transportation Districts 91 and 92 of the Southwest Region, including, without limitation, any bridges necessary for the highway. "Underwriters" shall mean, collectively, Morgan Stanley & Co. LLC, Raymond James & Associates, Inc, Loop Capital Markets LLC, Stifel, Nicolaus & Company, Incorporated and The Frazer Lanier Company, Incorporated. 8

58 ARTICLE II REPRESENTATIONS AND WARRANTIES Findings, Representations and Warranties. The Authority makes the following findings, representations and warranties as the basis for the undertakings on the Authority's part herein contained: the Authority is a public corporation and instrumentality of the State created pursuant to the Enabling Law and is authorized to sell and issue its bonds for the purposes specified in the Enabling Law; the Authority has determined and does hereby find that the issuance of the Bonds herein described is necessary to provide funds for deposit in the Alabama Trust Fund and the Rainy Day Account, to provide funding to the Alabama Medicaid Agency and to pay the costs of certain Transportation Projects; the entire State; the Authority has determined that the issuance of the Bonds will benefit pursuant to the Enabling Law, the Authority is authorized to irrevocably pledge the Pledged Funds for payment of debt service on the Bonds; and because the Debt Service payable on the Bonds on March 15, 2017, September 15, 2017 and March 15, 2018, will be paid from the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund, the Directors find that the BP Settlement Revenues due and payable to the State on April 4, 2017, will not be needed for the payment of Debt Service on the Bonds and may be withdrawn from the BP Settlement Fund and used to pay other costs permitted under the Enabling Law. 9

59 ARTICLE III DESCRIPTION OF THE SERIES 2016-A BONDS Authorization of Series 2016-A Bonds. Pursuant to the authority to do so contained in the applicable provisions of the constitution and laws of the State, including particularly the Enabling Law, there are hereby authorized to be sold and issued by the Authority a series of bonds designated "BP Settlement Revenue Bonds, Series 2016-A", which shall be in the aggregate principal amount, shall bear the rates of interest and shall mature on the dates and in the amounts set forth in Exhibit B hereto. The Bonds shall be issued (i) to pay the costs of Transportation Projects authorized by the Enabling Law, (ii) to capitalize a portion of the interest payable on the Series 2016-A Bonds, and (iii) to pay a portion of the Cost of Issuance. Authorized Denominations; Form and Number. The Series 2016-A Bonds shall be issuable as fully registered bonds without coupons in Authorized Denominations thereof. The Series 2016-A Bonds shall be numbered separately from R-1 upward. The form of the Series 2016-A Bonds shall be substantially as set forth in Section 3.4 hereof with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Resolution. Date; Interest. The Series 2016-A Bonds shall be dated their date of initial delivery and shall bear interest from such date, until the principal thereof shall become due and payable, at the applicable rates per annum set forth in Exhibit B. Interest on the Series 2016-A Bonds shall be payable on March 15, 2017, and on each September 15 and March 15 thereafter (each such date being herein called an "Interest Payment Date"), and shall be computed on the basis of a 360-day year with 12 months of 30 days each. Interest on overdue principal and premium and (to the extent legally enforceable) on any overdue installment of interest on the Series 2016-A Bonds shall be payable at the interest rate borne by such Series 2016-A Bond. Form of the Series 2016-A Bonds. The Series 2016-A Bonds and the authentication certificate and assignment form applicable thereto shall be substantially in the following form, with such insertions, omissions, substitutions and other variations as may be necessary to conform to the provisions hereof: 10

60 [Form of Series 2016-A Bonds] Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Authority or its agent for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. R _ UNITED STATES OF AMERICA STATE OF ALABAMA ALABAMA ECONOMIC SETTLEMENT AUTHORITY BP SETTLEMENT REVENUE BONDS SERIES 2016-A Interest Rate % Maturity Date September 15, 20 CUSIP Number The ALABAMA ECONOMIC SETTLEMENT AUTHORITY (the "Authority"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of Dollars ($ ) on the maturity date specified above with interest thereon from the dated date hereof until the maturity hereof at the per annum rate of interest specified above, payable on each March 15 and September 15, commencing March 15, Overdue installments of principal of and interest and premium (if any) on this bond shall bear interest from their respective due dates until paid at the rate of interest borne by the principal hereof prior to maturity. All interest on this bond (including, without limitation, interest on overdue installments of principal, interest and premium) shall be computed on the basis of a 360-day year of 12 consecutive 30-day months each. The principal of and the premium (if any) on this bond shall be payable in lawful money of the United States of America at the office of the State Treasurer of the State of Alabama (herein called the "State Treasurer") in the City of Montgomery, Alabama, and the interest payable on this bond on each interest payment date shall (except for the final payment of such interest which shall be made only upon the surrender of this bond) be remitted by the State Treasurer by check or draft mailed to the registered holder hereof at the address shown on the bond register maintained by the State Treasurer or, as provided in the Resolution (hereinafter defined) authorizing the issuance of this bond, by wire transfer or electronic funds transfer. 11

61 This bond is one of a duly authorized issue or series of bonds authorized to be issued in the aggregate principal amount of $ and designated BP Settlement Revenue Bonds, Series 2016-A (herein called the "Bonds"). The Bonds are being issued and delivered pursuant to Act No adopted during the 2016 First Special Session of the Alabama legislature (herein called the "Enabling Law"), and the provisions of a resolution (herein called the "Resolution") duly adopted by the governing body of the Alabama Economic Settlement Authority (herein called the "Authority"). Capitalized terms not defined herein shall have the meanings assigned in the Resolution. The indebtedness evidenced by the Bonds is a special limited obligation of the Authority payable solely out of Pledged Funds and the Series 2016-A Capitalized Interest Fund. Under the provisions of the Enabling Law and the Resolution, the Pledged Funds have been pledged and appropriated, to the extent required for such purpose, to pay the principal, interest and premium (if any) on the Bonds and the Authority's Taxable BP Settlement Revenue Bonds, Series 2016-B (the "Series 2016-B Bonds"). In the Resolution, the Authority has retained the right to issue, upon the satisfaction of certain conditions specified therein, additional bonds ("Additional Bonds") that are secured on parity with the Bonds and the Series 2016-B Bonds with respect to the pledge of the Pledged Funds that secures the payment of the Bonds and the Series 2016-B Bonds. The pledge of the Pledged Funds shall be for the benefit of the Bonds, the Series 2016-B Bonds and any Additional Bonds pro rata and without preference of one bond over another. The pledge of the Series 2016-A Capitalized Interest Fund is solely for the benefit of the Bonds. The Bonds shall not constitute an obligation or debt of the State of Alabama (the "State"), or any county, municipality or political subdivision of the State, nor shall the Bonds constitute a charge on the general credit or tax revenues or any thereof or on the general credit or revenues (other than Pledged Funds and the Series 2016-A Capitalized Interest Fund) of the Authority. Neither the Authority, the State, nor any county, municipality or political subdivision of the State shall be obligated, directly or indirectly, to contribute any funds, property or resources to the payment of the principal of or the interest and premium (if any) on the Bonds, except from the proceeds of the Bonds and the Pledged Funds. Those of the Bonds having a stated maturity on and after September 15, 202_, shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on, 202_, and on any date thereafter, at and for a redemption price with respect to each such Bond (or principal portion thereof) redeemed equal to the par or face amount of each such Bond (or principal portion thereof) to be redeemed plus accrued interest thereon to the date set for redemption. [Those of the Bonds having a stated maturity on September 15, 20 (the "20 Term Bonds"), are subject to mandatory redemption in the following principal amounts on September 15 in the following years at a redemption price with respect to each 20 Term Bond (or portion thereof) redeemed equal to the principal amount so redeemed: 12

62 Year Principal Amount To Be Redeemed 20 $ Not later than the date on which notice of mandatory redemption is to be given, the State Treasurer shall select 20 Term Bonds for redemption by lot; provided, however, that the Authority may, by timely notice delivered to the State Treasurer, direct that any or all of the following amounts be credited against the principal amount of 20 Term Bonds scheduled for redemption on such date: In the event that the Authority shall have partially redeemed any 20 Term Bonds or shall have provided for a partial redemption of such 20 Term Bonds in such a manner that the 20 Term Bonds for the redemption of which provision is made are considered as fully paid, the Authority may elect to apply all or any part (but only in denominations of $5,000 or any multiple thereof) of the principal amount of such 20 Term Bonds so redeemed or to be redeemed and not previously claimed as a credit to the reduction of the principal amount of 20 Term Bonds required to be redeemed pursuant to the schedule set forth immediately above on any September 15 coterminous with or subsequent to the date such optional redemption actually occurs.] Except as otherwise provided in the specific redemption provisions for the Bonds, if less than all Outstanding Bonds of a particular maturity and interest rate are to be redeemed, the particular Bonds of such maturity and interest rate to be redeemed shall be selected by lot (in Authorized Denominations) by the State Treasurer not less than 30 nor more than 60 days prior to the redemption date from the Outstanding Bonds of such maturity and interest rate which have not previously been called for redemption. The Bonds are issuable only as fully registered bonds without coupons in authorized denominations of $5,000 or any multiple thereof. Provision is made in the Resolution for the exchange of Bonds for a like aggregate principal amount of other Bonds in authorized denominations and of the same maturity and interest rate, all as may be requested by the holder surrendering the Bond or Bonds to be so exchanged and upon the terms and conditions specified in the Resolution. Subject to the provisions for the Bonds held in book-entry form, this bond is transferable by the registered holder hereof in person, or by duly authorized attorney, only on the books of the State Treasurer and only upon surrender of this bond to the State Treasurer for cancellation, and upon any such transfer a new fully registered bond of like tenor hereof will be issued to the transferee in exchange therefor, all as more particularly provided in the Resolution. ANY ASSIGNEE OR TRANSFEREE OF THIS BOND TAKES IT SUBJECT TO ALL PAYMENTS OF PRINCIPAL AND INTEREST IN FACT MADE WITH RESPECT HERETO. No service charge shall be made for any transfer hereinbefore referred to, but the State Treasurer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds. 13

63 The Authority and the State Treasurer may treat the person in whose name this bond is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this bond is overdue, and neither the Authority, the State Treasurer nor any agent of the Authority or the State Treasurer shall be affected by notice to the contrary. It is hereby certified, recited and declared that the indebtedness evidenced and ordered paid by this bond is lawfully due without condition, abatement or offset of any description; that all acts, conditions and things required by the constitution and laws of the State of Alabama to happen, exist and be performed precedent to and in the issuance of this bond have happened, do exist and have been performed; and that the indebtedness evidenced and ordered paid by this bond, together with all other indebtedness of the Authority, is within every limit prescribed in the constitution and laws of the State of Alabama. Execution of the authentication certificate hereon is essential to the validity hereof and is conclusive of the due issue hereof under the Resolution. [Balance of page intentionally left blank] 14

64 IN WITNESS WHEREOF, the Authority has caused this bond to be executed in its name and behalf by the [President] [Vice President] of the Authority, has caused its official seal to hereunto affixed, has caused this bond to be attested by its Secretary, and has caused this bond to be dated its date of initial delivery. ALABAMA ECONOMIC SETTLEMENT AUTHORITY [ S E A L ] By: [President] [Vice President] ATTESTED: Secretary Certificate of Authentication This bond is one of the Bonds issued by the Alabama Economic Settlement Authority pursuant to Act No adopted during the 2016 First Special Session of the Alabama legislature, and a resolution duly adopted by the Board of Directors of the said Authority on, Date of Authentication:,. By: State Treasurer of Alabama or Authorized Delegate 15

65 Form of Assignment For value received, hereby sell(s), assign(s) and transfer(s) unto (insert name, address and social security number or taxpayer identification number of transferee) this bond and hereby irrevocably constitute(s) and appoint(s) attorney to transfer this bond on the books of the Authority at the office of the State Treasurer with full power of substitution in the premises. Dated: Signature Guaranteed: By: * (Bank or Trust Company) NOTE: the name signed to this assignment must correspond with the name of the payee written on the face of the within bond in all respects, without alteration, enlargement or change whatsoever. By: (Authorized Officer) Its Medallion Number: *Signature(s) must be guaranteed by an eligible guarantor institution which is a member of a recognized signature guarantee program, i.e., Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or New York Stock Exchange Medallion Signature Program (MSP). 16

66 ARTICLE IV DESCRIPTION OF THE SERIES 2016-B BONDS Authorization of Series 2016-B Bonds. Pursuant to the authority to do so contained in the applicable provisions of the constitution and laws of the State, including particularly the Enabling Law, there are hereby authorized to be sold and issued by the Authority a series of bonds designated "Taxable BP Settlement Revenue Bonds, Series 2016-B", which shall be in the aggregate principal amount, shall bear the rates of interest and shall mature on the dates and in the amounts set forth in Exhibit B hereto. The Bonds shall be issued (i) to reimburse the General Fund Rainy Day Account for certain amounts previously withdrawn therefrom, (ii) to reimburse the Alabama Trust Fund for certain amounts previously withdrawn therefrom, (iii) to provide funds to the Alabama Medicaid Agency during the 2017 and 2018 Fiscal Years, (iv) to capitalize a portion of the interest payable on the Series 2016-B Bonds, and (v) to pay a portion of the Cost of Issuance. Authorized Denominations; Form and Number. The Series 2016-B Bonds shall be issuable as fully registered bonds without coupons in Authorized Denominations thereof. The Series 2016-B Bonds shall be numbered separately from R-1 upward. The form of the Series 2016-B Bonds shall be substantially as set forth in Section 4.4 hereof with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Resolution. Date; Interest. The Series 2016-B Bonds shall be dated their date of initial delivery and shall bear interest from such date, until the principal thereof shall become due and payable, at the applicable rates per annum set forth in Exhibit B. Interest on the Series 2016-B Bonds shall be payable on March 15, 2017, and on each September 15 and March 15 thereafter (each such date being herein called an "Interest Payment Date"), and shall be computed on the basis of a 360-day year with 12 months of 30 days each. Interest on overdue principal and premium and (to the extent legally enforceable) on any overdue installment of interest on the Series 2016-B Bonds shall be payable at the interest rate borne by such Series 2016-B Bond. Form of the Series 2016-B Bonds. The Series 2016-B Bonds and the authentication certificate and assignment form applicable thereto shall be substantially in the following form, with such insertions, omissions, substitutions and other variations as may be necessary to conform to the provisions hereof: 17

67 [Form of Series 2016-B Bonds] Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Authority or its agent for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. R _ UNITED STATES OF AMERICA STATE OF ALABAMA ALABAMA ECONOMIC SETTLEMENT AUTHORITY TAXABLE BP SETTLEMENT REVENUE BONDS SERIES 2016-B Interest Rate % Maturity Date September 15, 20 CUSIP Number The ALABAMA ECONOMIC SETTLEMENT AUTHORITY (the "Authority"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of Dollars ($ ) on the maturity date specified above with interest thereon from the dated date hereof until the maturity hereof at the per annum rate of interest specified above, payable on each March 15 and September 15, commencing March 15, Overdue installments of principal of and interest and premium (if any) on this bond shall bear interest from their respective due dates until paid at the rate of interest borne by the principal hereof prior to maturity. All interest on this bond (including, without limitation, interest on overdue installments of principal, interest and premium) shall be computed on the basis of a 360-day year of 12 consecutive 30-day months each. The principal of and the premium (if any) on this bond shall be payable in lawful money of the United States of America at the office of the State Treasurer of the State of Alabama (herein called the "State Treasurer") in the City of Montgomery, Alabama, and the interest payable on this bond on each interest payment date shall (except for the final payment of such interest which shall be made only upon the surrender of this bond) be remitted by the State Treasurer by check or draft mailed to the registered holder hereof at the address shown on the bond register maintained by the State Treasurer or, as provided in the Resolution (hereinafter defined) authorizing the issuance of this bond, by wire transfer or electronic funds transfer. 18

68 This bond is one of a duly authorized issue or series of bonds authorized to be issued in the aggregate principal amount of $ and designated Taxable BP Settlement Revenue Bonds, Series 2016-B (herein called the "Bonds"). The Bonds are being issued and delivered pursuant to Act No adopted during the 2016 First Special Session of the Alabama legislature (herein called the "Enabling Law"), and the provisions of a resolution (herein called the "Resolution") duly adopted by the governing body of the Alabama Economic Settlement Authority (herein called the "Authority"). Capitalized terms not defined herein shall have the meanings assigned in the Resolution. The indebtedness evidenced by the Bonds is a special limited obligation of the Authority payable solely out of Pledged Funds and the Series 2016-B Capitalized Interest Fund. Under the provisions of the Enabling Law and the Resolution, the Pledged Funds have been pledged and appropriated, to the extent required for such purpose, to pay the principal of and interest on the Bonds and the Authority's BP Settlement Revenue Bonds, Series 2016-A (the "Series 2016-A Bonds"). In the Resolution, the Authority has retained the right to issue, upon the satisfaction of certain conditions specified therein, additional bonds ("Additional Bonds") that are secured on parity with the Bonds and the Series 2016-A Bonds with respect to the pledge of the Pledged Funds that secures the payment of the Bonds and the Series 2016-A Bonds. The pledge of the Pledged Funds shall be for the benefit of the Bonds, the Series 2016-A Bonds and any Additional Bonds pro rata and without preference of one bond over another. The pledge of the Series 2016-B Capitalized Interest Fund is solely for the benefit of the Bonds. The Bonds shall not constitute an obligation or debt of the State of Alabama (the "State"), or any county, municipality or political subdivision of the State, nor shall the Bonds constitute a charge on the general credit or tax revenues or any thereof or on the general credit or revenues (other than Pledged Funds and the Series 2016-B Capitalized Interest Fund) of the Authority. Neither the Authority, the State, nor any county, municipality or political subdivision of the State shall be obligated, directly or indirectly, to contribute any funds, property or resources to the payment of the principal of or the interest and premium (if any) on the Bonds, except from the proceeds of the Bonds and the Pledged Funds. The Bonds shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on any date, at and for a redemption price with respect to each such Bond (or principal portion thereof) redeemed equal to the Make-Whole Redemption Price of each such Bond (or principal portion thereof) to be redeemed plus accrued interest thereon to the date set for redemption. [Those of the Bonds having a stated maturity on September 15, 20 (the "20 Term Bonds"), are subject to mandatory redemption in the following principal amounts on September 15 in the following years at a redemption price with respect to each 20 Term Bond (or portion thereof) redeemed equal to the principal amount so redeemed: 19

69 Year 20 Principal Amount To Be Redeemed 20 $ Term Bonds to be redeemed pursuant to this paragraph shall be redeemed pro rata; provided, however, that the Authority may, by timely notice delivered to the State Treasurer, direct that any or all of the following amounts be credited against the principal amount of 20 Term Bonds scheduled for redemption on any such date: In the event that the Authority shall have partially redeemed any 20 Term Bonds or shall have provided for a partial redemption of such 20 Term Bonds in such a manner that the 20 Term Bonds for the redemption of which provision is made are considered as fully paid, the Authority may elect to apply all or any part (but only in denominations of $5,000 or any multiple thereof) of the principal amount of such 20 Term Bonds so redeemed or to be redeemed and not previously claimed as a credit to the reduction of the principal amount of 20 Term Bonds required to be redeemed pursuant to the schedule set forth immediately above on any September 15 coterminous with or subsequent to the date such optional redemption actually occurs.] Except as otherwise provided in the specific redemption provisions for the Bonds, if less than all Outstanding Bonds of a particular maturity and interest rate are to be redeemed, the Bonds of such maturity and interest rate shall be redeemed pro rata, rounded to the nearest Authorized Denomination, among the Holders of Bonds of such maturity and interest rate by redeeming from each such Holder that principal amount which bears the same proportion to the principal amount of such maturity and interest rate registered in the name of such Holder as the total principal amount of such maturity and interest rate to be redeemed bears to the aggregate Outstanding principal amount of Bonds of such maturity and interest rate. Pursuant to the Operational Arrangements of DTC, the Authority has advised DTC that it proposes to use pro rata pass-through distributions of principal with respect to optional redemptions of less than all outstanding principal amounts of Bonds of any maturity and interest rate and with respect to mandatory redemptions of 20 Term Bonds. The Bonds are issuable only as fully registered bonds without coupons in authorized denominations of $5,000 or any multiple thereof. Provision is made in the Resolution for the exchange of Bonds for a like aggregate principal amount of other Bonds in authorized denominations and of the same maturity and interest rate, all as may be requested by the holder surrendering the Bond or Bonds to be so exchanged and upon the terms and conditions specified in the Resolution. Subject to the provisions for the Bonds held in book-entry form, this bond is transferable by the registered holder hereof in person, or by duly authorized attorney, only on the books of the State Treasurer and only upon surrender of this bond to the State Treasurer for cancellation, and upon any such transfer a new fully registered bond of like tenor hereof will be issued to the transferee in exchange therefor, all as more particularly provided in the Resolution. ANY ASSIGNEE OR TRANSFEREE OF THIS BOND TAKES IT SUBJECT TO ALL PAYMENTS OF PRINCIPAL AND INTEREST IN FACT MADE WITH RESPECT HERETO.

70 No service charge shall be made for any transfer hereinbefore referred to, but the State Treasurer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds. The Authority and the State Treasurer may treat the person in whose name this bond is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this bond is overdue, and neither the Authority, the State Treasurer nor any agent of the Authority or the State Treasurer shall be affected by notice to the contrary. It is hereby certified, recited and declared that the indebtedness evidenced and ordered paid by this bond is lawfully due without condition, abatement or offset of any description; that all acts, conditions and things required by the constitution and laws of the State of Alabama to happen, exist and be performed precedent to and in the issuance of this bond have happened, do exist and have been performed; and that the indebtedness evidenced and ordered paid by this bond, together with all other indebtedness of the Authority, is within every limit prescribed in the constitution and laws of the State of Alabama. Execution of the authentication certificate hereon is essential to the validity hereof and is conclusive of the due issue hereof under the Resolution. [Balance of page intentionally left blank] 21

71 IN WITNESS WHEREOF, the Authority has caused this bond to be executed in its name and behalf by the [President] [Vice President] of the Authority, has caused its official seal to hereunto affixed, has caused this bond to be attested by its Secretary, and has caused this bond to be dated its date of initial delivery. ALABAMA ECONOMIC SETTLEMENT AUTHORITY [ S E A L ] By: [President] [Vice President] ATTESTED: Secretary Certificate of Authentication This bond is one of the Bonds issued by the Alabama Economic Settlement Authority pursuant to Act No adopted during the 2016 First Special Session of the Alabama legislature, and a resolution duly adopted by the Board of Directors of the said Authority on, Date of Authentication:,. By: State Treasurer of Alabama or Authorized Delegate 22

72 Form of Assignment For value received, hereby sell(s), assign(s) and transfer(s) unto (insert name, address and social security number or taxpayer identification number of transferee) this bond and hereby irrevocably constitute(s) and appoint(s) attorney to transfer this bond on the books of the Authority at the office of the State Treasurer with full power of substitution in the premises. Dated: Signature Guaranteed: By: * (Bank or Trust Company) NOTE: the name signed to this assignment must correspond with the name of the payee written on the face of the within bond in all respects, without alteration, enlargement or change whatsoever. By: (Authorized Officer) Its Medallion Number: *Signature(s) must be guaranteed by an eligible guarantor institution which is a member of a recognized signature guarantee program, i.e., Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or New York Stock Exchange Medallion Signature Program (MSP). 23

73 ARTICLE V EXECUTION, REGISTRATION, TRANSFER, PAYMENT OF BONDS Execution and Authentication. The Bonds shall be executed on behalf of the Authority by its President or Vice President under the seal of the Authority and attested by the Secretary of the Authority. The signature of any of these officers on the Bonds may be manual or, to the extent permitted by law, facsimile and a facsimile of the seal of the Authority may be printed or otherwise reproduced on each of the Bonds. Bonds bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Authority shall bind the Authority, notwithstanding that such individuals or any of them shall have ceased to hold such offices prior to the authentication and delivery of such Bonds or shall not have held such offices at the date of such Bonds. No Bonds shall be secured by, or be entitled to any lien, right or benefit under, this Resolution or be valid or obligatory for any purpose, unless there appears on such Bond a certificate of authentication substantially in the form provided for herein, executed by the State Treasurer (or his delegate as authorized below) by manual signature, and such certificate upon any Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered hereunder. Upon nomination for such responsibility by the State Treasurer, the Authority hereby authorizes and designates Daria Story and Dianne Reynolds as persons who are individually authorized, under the direction of the State Treasurer, to authenticate any or all of the Bonds prior to the delivery thereof by manually signing the authentication certificates on such Bonds. The Authority hereby finds that each of said individuals is an official or employee in the office of the State Treasurer. Registration and Transfer. The Authority shall cause to be kept at the office of the State Treasurer for each series of Bonds a register (herein referred to as a "Bond Register") in which, subject to such reasonable regulations as the State Treasurer may prescribe, the State Treasurer shall provide for the registration of Bonds and registration of transfers of Bonds entitled to be registered or transferred as herein provided. The State Treasurer shall serve as "Bond Registrar" for the purpose of registering Bonds and transfers of Bonds as herein provided. Upon surrender for transfer of any Bond at the office of the State Treasurer, the State Treasurer shall provide for the execution, authentication and delivery, in the name of the designated transferee or transferees, of a new Bond of the same series, principal amount, maturity and interest rate. At the option of the Holder, Bonds may be exchanged for other Bonds of a like aggregate principal amount, of any Authorized Denominations and of the same series, maturity and interest rate, upon surrender of the Bonds to be exchanged at the office of the State Treasurer. Whenever any Bonds are so to be surrendered by exchange, the State Treasurer shall 24

74 provide for the execution, authentication and delivery of the Bonds which the Holder making the exchange is entitled to receive. All Bonds issued upon any transfer of Bonds shall be the valid obligations of the Authority and entitled to the same security and benefits under this Resolution as the Bonds surrendered upon such transfer. Every Bond presented or surrendered for transfer shall (if so required by the State Treasurer) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the State Treasurer, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any transfer of Bonds, but the State Treasurer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds. If any Bond (or any portion of the principal thereof) is duly called for redemption, the State Treasurer shall not be required to transfer or exchange such Bond (or any portion of the principal thereof called for redemption) during the period of forty-five (45) days immediately preceding the date fixed for such redemption. Notwithstanding any provision of this Section 5.2 to the contrary, the procedures for registration, transfer and exchange of Bonds so long as the Book Entry Only System (as defined in Section 5.8) is in effect will be governed by the provisions of Section 5.8(a), (b) and (c). Mutilated, Destroyed, Lost and Stolen Bonds. If (i) any mutilated Bond is surrendered to the State Treasurer, or the State Treasurer receives evidence to his satisfaction of the destruction, loss or theft of any Bond, and (ii) there is delivered to the State Treasurer such security and/or indemnity as may be required by him to save him harmless, then, in the absence of notice to the State Treasurer that such Bond has been acquired by a bona fide purchaser, the State Treasurer shall provide for the execution, authentication and delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, of a new Bond, of like tenor and principal amount, bearing a number not contemporaneously outstanding. Upon the issuance of any new Bond under this Section, the State Treasurer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. Every new Bond issued pursuant to this Section in lieu of any destroyed, lost or stolen Bond shall constitute an original additional contractual obligation of the Authority, whether or not the destroyed, lost or stolen Bond shall be at any time enforceable by anyone, and shall be entitled to all the security and benefits of this Resolution equally and ratably with all other Outstanding Bonds. 25

75 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds. Payment of Interest on Bonds; Interest Rights Preserved. Interest on any Bond which is payable, and punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Bond is registered at the close of business on the Regular Record Date for such interest, which shall be the 15th day (whether or not a Business Day) next preceding such Interest Payment Date. Any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date solely by virtue of such Holder having been such Holder; and such Defaulted Interest shall be paid by the State Treasurer to the persons in whose names such Bonds are registered at the close of business on a special record date (herein called a "Special Record Date") for the payment of such Defaulted Interest, which shall be fixed in the following manner. The State Treasurer shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The State Treasurer shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of a Bond at his address as it appears in the applicable Bond Register not less than 10 days' prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Bonds are registered on such Special Record Date. Subject to the foregoing provisions of this Section, each Bond delivered under this Resolution upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond and each such Bond shall bear interest from such date that neither gain nor loss in interest shall result from such transfer, exchange or substitution. Notwithstanding any provision of this Section 5.4 to the contrary, the procedures for payment of interest on the Bonds so long as the Book-Entry Only System is in effect will be governed by the provisions of Section 5.8(a), (b) and (c). Persons Deemed Owners. The State Treasurer and any agent of the State Treasurer may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of Debt Service on such Bond (subject to Section 5.4) and for all other purposes whatsoever whether or not such Bond is overdue, and, to the extent permitted by law, neither the Authority, the State Treasurer nor any such agent shall be affected by notice to the contrary. 26

76 Payments Due on a Day Other than a Business Day. If any payment on the Bonds is due on a day which is not a Business Day, such payment shall be made on the first succeeding day which is a Business Day in the same amount and with the same effect as if made on the day such payment was due. Cancellation. All Bonds surrendered for payment, redemption, transfer or exchange shall be promptly cancelled by the State Treasurer. No Bonds shall be registered in lieu of or in exchange for any Bond cancelled as provided in this Section, except as expressly provided by this Resolution. Book-Entry Only System; Payment Provisions. The registration and payment of Bonds shall be made pursuant to the Book-Entry Only System (the "Book-Entry Only System") administered by The Depository Trust Company ("DTC") in accordance with the Authority's Letter of Representations on file with DTC (the "Letter of Representations") until such system is terminated pursuant to Section 5.8(c). While Bonds are in the Book-Entry Only System, the following provisions shall apply for purposes of this Resolution and shall supersede any contrary provisions of this Resolution: Notwithstanding the fact that DTC may hold a single physical certificate for each stated maturity and interest rate for purposes of the Book-Entry Only System, the term "Bond" shall mean each separate Security (as defined in the Letter of Representations) issued pursuant to the Book-Entry Only System, and the term "Holder" shall mean the person identified on the records of DTC as the owner of the related Security. The terms and limitations of this Resolution with respect to each separate Bond shall be applicable to each separate Security registered under the Book- Entry Only System. All notices under, this Resolution to Holders of Bonds from the State Treasurer shall be delivered by the State Treasurer to DTC for distribution by DTC in accordance with the Letter of Representations. All payments of Debt Service on the Bonds shall be made by the State Treasurer to DTC and shall be made by DTC to the Participants (as such term is defined in the Letter of Representations) as provided in the Letter of Representations. All such payments shall be valid and effective fully to satisfy and discharge the Authority's obligations with respect to such payments. If the State Treasurer determines that it would be in the best interests of the Holders of Bonds for the Book-Entry Only System to be discontinued (in whole or in part), 27

77 such Book-Entry Only System shall be discontinued (in whole or in part) in accordance with the provisions of the Letter of Representations. If the Book-Entry Only System is discontinued with respect to any Bonds, payment of interest on such Bonds which is due, and punctually paid or duly provided for, on any Interest Payment Date shall be made by check or draft mailed by the State Treasurer to the persons entitled thereto at their addresses appearing in the Bond Register. Such payments of interest shall be deemed timely made if so mailed on the Interest Payment Date (or, if such Interest Payment Date is not a Business Day, on the Business Day next following such Interest Payment Date). Payment of the principal of (and premium, if any, on) such Bonds and payment of accrued interest on the Bonds due upon redemption on any date other than an Interest Payment Date shall be made only upon surrender thereof at the office of the State Treasurer in Montgomery, Alabama. Subsection (d) of this Section to the contrary notwithstanding, upon the written request of the Holder of any Bond in a principal amount of not less than $100,000, the State Treasurer will make or cause to be made payment of the Debt Service due on such Bond on any Bond Payment Date by wire transfer or electronic funds transfer to an account of such Holder maintained at a bank in the continental United States of America or by any other method providing for payment in same day funds that is acceptable to the State Treasurer, provided that: such written request contains adequate instructions for the method of payment, the Holder agrees to pay the State Treasurer's reasonable and customary fee for such service, and payment of the principal of (and redemption premium, if any, on) such Bond and payment of accrued interest on such Bond due upon redemption on any date other than an Interest Payment Date shall be made only upon surrender of such Bond to the State Treasurer. 28

78 ARTICLE VI REDEMPTION OF BONDS Optional Redemption. Those of the Series 2016-A Bonds having a stated maturity on and after September 15, 202_, shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on, 202_, and on any date thereafter, at and for a redemption price with respect to each such Series 2016-A Bond (or principal portion thereof) redeemed equal to the par or face amount thereof plus accrued interest to the date set for redemption. The Series 2016-B Bonds shall be subject to redemption and payment, at the option of the Authority, as a whole or in part, on any date, at and for a redemption price with respect to each such Series 2016-B Bond (or principal portion thereof) redeemed equal to the Make-Whole Redemption Price of each such Series 2016-B Bond (or principal portion thereof) to be redeemed plus accrued interest thereon to the date set for redemption. Mandatory Redemption. Those of the Series 2016-A Bonds having a stated maturity on September 15, 20 (the "Series 2016-A 20 Term Bonds"), are subject to mandatory redemption in the following principal amounts on September 15 in the following years at a redemption price with respect to each Series 2016-A 20 Term Bond (or portion thereof) redeemed equal to the principal amount so redeemed: Year Principal Amount To Be Redeemed 20 $ Not later than the date on which notice of mandatory redemption is to be given, the State Treasurer shall select Series 2016-A 20 Term Bonds for redemption by lot; provided, however, that the Authority may, by timely notice delivered to the State Treasurer, direct that any or all of the following amounts be credited against the principal amount of Series 2016-A 20 Term Bonds scheduled for redemption on such date: In the event that the Authority shall have partially redeemed any 2016-A 20 Term Bonds or shall have provided for a partial redemption of such 2016-A 20 Term Bonds in such a manner that the 2016-A 20 Term Bonds for the redemption of which provision is made are considered as fully paid, other than Series 2016-A 20 Term Bonds redeemed pursuant to this paragraph, the Authority may elect to apply all or any part (but only in Authorized Denominations) of the principal amount of such 2016-A 20 Term Bonds so redeemed or to be redeemed and not previously claimed as a credit to the reduction of the principal amount of 2016-A 20 Term Bonds required to be redeemed pursuant to the schedule set forth immediately above on any September 15 coterminous with or subsequent to the date such optional redemption actually occurs. 29

79 Those of the Series 2016-B Bonds having a stated maturity on September 15, 20 (the "Series 2016-B 20 Term Bonds"), are subject to mandatory redemption in the following principal amounts on September 15 in the following years at a redemption price with respect to each Series 2016-B 20 Term Bond (or portion thereof) redeemed equal to the principal amount so redeemed: Year 30 Principal Amount To Be Redeemed 20 $ Series 2016-B 20 Term Bonds shall be redeemed pro rata; provided, however, that the Authority may, by timely notice delivered to the State Treasurer, direct that any or all of the following amounts be credited against the principal amount of Series 2016-B 20 Term Bonds scheduled for redemption on any such date: In the event that the Authority shall have partially redeemed any 2016-B 20 Term Bonds or shall have provided for a partial redemption of such 2016-B 20 Term Bonds in such a manner that the 2016-B 20 Term Bonds for the redemption of which provision is made are considered as fully paid, other than 2016-A 20 Term Bonds redeemed pursuant to this paragraph, the Authority may elect to apply all or any part (but only in Authorized Denominations) of the principal amount of such 2016-B 20 Term Bonds so redeemed or to be redeemed and not previously claimed as a credit to the reduction of the principal amount of 2016-B 20 Term Bonds required to be redeemed pursuant to the schedule set forth immediately above on any September 15 coterminous with or subsequent to the date such optional redemption actually occurs. Election to Redeem. The election of the Authority to exercise any right of optional redemption shall be evidenced by a certified resolution of the Authority delivered to the State Treasurer. In case of any optional redemption of less than all the Outstanding Bonds of a series, the Authority shall, at least 60 days prior to the date fixed by the Authority for redemption (unless a shorter notice is acceptable to the State Treasurer), notify the State Treasurer of such redemption date and of the series, principal amount, maturities and interest rates of Bonds to be redeemed. No further consent or direction from the Authority shall be necessary in the case of redemption of Series 2016-A 20 Term Bonds or Series 2016-B 20 Term Bonds pursuant to any mandatory redemption. Selection by State Treasurer of Bonds to be Redeemed. Except as otherwise provided in the specific redemption provisions, if less than all Bonds of a series are to be optionally redeemed, the principal amount of each maturity and interest rate of such series to be redeemed may be specified by the Authority by notice to the State Treasurer, or, in the absence of timely receipt by the State Treasurer of such notice, shall be selected by the State Treasurer by lot or such other method as the State Treasurer shall deem fair

80 and appropriate; provided, however, that the principal amount of Bonds of such series, maturity and interest rate to be redeemed may not be larger than the principal amount of the Bonds of such series, maturity and interest rate then eligible for redemption and may not be smaller than the smallest authorized Denomination. Except as otherwise provided in the specific redemption provisions for the Series 2016-A Bonds, if less than all Outstanding Series 2016-A Bonds of a particular maturity and interest rate are to be redeemed, the particular Series 2016-A Bonds of such maturity and interest rate to be redeemed shall be selected by lot (in Authorized Denominations) by the State Treasurer not less than 30 nor more than 60 days prior to the redemption date from the Outstanding Series 2016-A Bonds of such maturity and interest rate which have not previously been called for redemption. Pursuant to the current Operational Arrangements of DTC, the Authority has advised DTC that it proposes to use pro rata pass-through distributions of principal with respect to optional redemptions of less than all outstanding principal amounts of Series 2016-B Bonds of any maturity and interest rate and with respect to mandatory redemptions of Series 2016-B 20 Term Bonds. Subject to compliance with such Operational Arrangements of DTC while Series 2016-B Bonds are in the Book-Entry Only System, except as otherwise provided in the specific redemption provisions for the Series 2016-B Bonds, if less than all Outstanding Series 2016-B Bonds of a particular maturity and interest rate are to be redeemed, the Series 2016-B Bonds of such maturity and interest rate shall be redeemed pro rata, rounded to the nearest Authorized Denomination, among the Holders of Series 2016-B Bonds of such maturity and interest rate by redeeming from such Holders that principal amount which bears the same proportion to the principal amount of such maturity and interest rate registered in the name of each such Holder as the total principal amount of such maturity and interest rate to be redeemed bears to the aggregate Outstanding principal amount of Series 2016-B Bonds of such maturity and interest rate. For all purposes of this Resolution, unless the context otherwise requires, all provisions relating to the redemption of Bonds shall relate, in the case of any Bond redeemed or to be redeemed only in part, to the portion of the principal of such Bond which has been or is to be redeemed. Notice of Redemption. Unless waived by the Holders of all Outstanding Bonds of the applicable series, notice of redemption (which in the case of optional redemption may be conditional) shall be sent by certified or registered mail, return receipt requested, or by overnight delivery service (provided that so long as the Bonds of such series are held under the Book-Entry Only System the State Treasure shall deliver the notice of redemption in the manner required by DTC at such time), to the Holders of all Bonds to be redeemed at their address shown on the applicable Bond Register not more than sixty (60) days and not less than thirty (30) days prior to the redemption date. All notices of redemption shall state: 31

81 the redemption date, the redemption price, the principal amount of Bonds to be redeemed, that on the redemption date the redemption price of each of the Bonds to be redeemed will become due and payable and that the interest thereon shall cease to accrue from and after said date, and the place or places where the Bonds to be redeemed are to be surrendered for payment of the redemption price. Notice of redemption of Bonds to be redeemed shall be given by the State Treasurer or, at the State Treasurer's request, by an agent of the State Treasurer in the name and at the expense of the Authority. In addition to the foregoing, further notice of any redemption of Bonds shall be given (i) at least two (2) Business Days prior to the mailed notice to Bondholders, by registered or certified mail or overnight delivery service to all registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and (ii) simultaneously with mailed notice to the Bondholders, by registered or certified mail or overnight delivery service to each national information service that disseminates notices of redemption of obligations such as the Bonds. Such further notice shall contain the information required in the notice of redemption sent to the Bondholders whose Bonds have been called for redemption. Failure to give all or any portion of such further notice shall not in any manner defeat the effectiveness of a call for redemption. Deposit of Redemption Price. On or prior to any redemption date, the State Treasurer shall deposit in a separate account within the Debt Service Fund an amount of money sufficient to pay the redemption price of all the Bonds of a series which are to be redeemed on that date. Such money shall be held solely for the benefit of the persons entitled to such redemption price. Bonds Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the Authority shall default in the payment of the redemption price) such Bonds shall cease to bear interest. Upon surrender of any such Bond for redemption in accordance with said notice such Bond shall be paid by the Authority at the redemption price. Installments of interest due prior to the redemption date shall be payable to the Holders of the Bonds registered as such on the relevant Record Dates according to the terms of such Bonds and the provisions of Section

82 If any Bond called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the redemption date at the rate of interest borne by such Bond. Bonds Redeemed in Part. Unless otherwise provided herein, any Bond which is to be redeemed only in part shall be surrendered at the office of the State Treasurer (with, if the State Treasurer so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the State Treasurer duly executed by, the Holder thereof or his attorney duly authorized in writing), and the State Treasurer shall provide for the execution, authentication and delivery to the Holder of such Bond, without service charge, a new Bond or Bonds, of the same series, maturity and interest rate and of any authorized denomination or denominations, as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. 33

83 ARTICLE VII SOURCE OF PAYMENT Source of Payment for Bonds; Pledge of Pledged Funds; Pledge of Capitalized Interest Funds for Certain Bonds. The indebtedness evidenced and ordered paid by the Bonds shall be a special limited obligation of the Authority payable solely from the Pledged Funds and, to the extent provided below, the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund. The Bonds shall not constitute an obligation or debt of the State, or any county, municipality or political subdivision of the State, nor shall the Bonds constitute a charge on the general credit or tax revenues of any thereof or on the general credit or revenues (other than Pledged Funds, the Series 2016-A Capitalized Interest Fund and the Series 2016-B Capitalized Interest Fund) of the Authority. Neither the Authority, the State, nor any county, municipality or political subdivision of the State shall be obligated, directly or indirectly, to contribute any funds, property or resources to the payment of the principal of or the interest and premium (if any) on the Bonds, except from the proceeds of the Bonds and the Pledged Funds. In order to secure the payment of debt service on the Bonds and any Additional Bonds as the same may become due and payable, the Authority does hereby pledge (i) in accordance with the pledge and appropriations made in the Enabling Law, the Appropriated Funds; and (ii) any moneys and investments held in the Debt Service Fund (collectively, the "Pledged Funds"). The said pledge of the Pledged Funds for the benefit of the Bonds and any Additional Bonds shall be prior and superior to any pledge hereafter made with respect to any other bonds or obligations of the Authority hereafter authorized. The pledge herein made of the Pledged Funds shall be for the benefit of the Bonds and any Additional Bonds pro rata and without preference of one bond over another. In order to secure the payment of debt service on the Series 2016-A Bonds as the same may become due and payable, the Authority does hereby pledge any moneys and investments held in the Series 2016-A Capitalized Interest Fund. The said pledge of the Series 2016-A Capitalized Interest Fund for the benefit of the Series 2016-A Bonds shall be for the exclusive benefit of the Series 2016-A Bonds pro rata and without preference of one bond over another. In order to secure the payment of debt service on the Series 2016-B Bonds as the same may become due and payable, the Authority does hereby pledge any moneys and investments held in the Series 2016-B Capitalized Interest Fund. The said pledge of the Series 2016-B Capitalized Interest Fund for the benefit of the Series 2016-B Bonds shall be for the exclusive benefit of the Series 2016-B Bonds pro rata and without preference of one bond over another. Issuance of Additional Bonds. The Authority may, at any time and from time to time, subject to the conditions hereinafter specified, issue Additional Bonds for any one or more purposes at the time 34

84 authorized by applicable law, with such Additional Bonds being secured by a pledge of and security interest in the Pledged Funds on a parity of lien with the pledge and assignment thereof for the benefit of the Bonds. Such Additional Bonds may be in such form and denominations, shall bear interest at such rate or rates, shall mature in such year or years and may contain such provisions for redemption prior to maturity, all as may be provided in a Supplemental Resolution under which they are issued. Each issue of Additional Bonds shall contain an appropriate series designation. Prior to the issuance of any Additional Bonds, the Authority shall deliver to the State Treasurer the Additional Bonds proposed to be issued, duly executed and accompanied by the following: Supplemental Resolution. A copy of a Supplemental Resolution duly certified as having been adopted by the Directors and containing the following: (i) a description of the Additional Bonds to be issued, including the form of the Additional Bonds and various certificates applicable thereto, the aggregate principal amount, the numbers and series designation, the denomination or denominations, the dated date, the interest rate or rates, the maturity or maturities thereof, and the provisions for the redemption thereof prior to maturity; (ii) a statement of the purpose for which such Additional Bonds are proposed to be issued; (iii) a reference to the act or acts of the Legislature of the State of Alabama pursuant to which such Additional Bonds are authorized to be issued; and (iv) any other provision that does not conflict with the provisions hereof. Certificate to the State Treasurer. A request that the State Treasurer (or a delegate of the State Treasurer) authenticate and deliver the Additional Bonds proposed to be issued and reciting the following: (i) that no default in the payment of the principal of or interest on the Bonds or any Outstanding Additional Bonds has occurred and is continuing; (ii) the person or persons to whom such Additional Bonds have been sold and awarded and shall be delivered; 35

85 (iii) the purchase price of such Additional Bonds, or if such Additional Bonds are to be exchanged for obligations to be refunded, a statement to that effect; and (iv) a list of all Bonds and Additional Bonds previously issued by the Authority and at the time Outstanding. Certificate as to Settlement Agreement Revenues. A certificate of the State Director of Finance to the effect that (i) the Annual Settlement Agreement Revenues for the then current and each subsequent Settlement Payment Year are not less than (ii) the Annual Debt Service payable during each such Settlement Payment Year on the Bonds and all Additional Bonds that will be Outstanding immediately following the issuance of the Additional Bonds proposed to be issued. Opinion of Bond Counsel. An Opinion of Bond Counsel dated as of the date of the issuance of such Additional Bonds approving the validity of such Additional Bonds. Upon the receipt of the documents required by the provisions of this section to be furnished to it, the State Treasurer shall thereupon authenticate the Additional Bonds proposed to be issued. When so authenticated, the State Treasurer shall deliver said Additional Bonds upon the order of the Authority to the purchaser thereof upon the payment therefor by such purchaser to the Authority of the purchase price therefor; provided, that any Additional Bonds issued to refund outstanding Bonds may be exchanged for bonds being refunded. Any Additional Bonds issued pursuant to and in compliance with the terms of this Resolution shall be entitled to the benefit and protection of this Resolution equally and proportionately with the Bonds and any other Additional Bonds issued hereunder. The Authority shall not issue any bonds secured by the Pledged Funds, other than Additional Bonds. Provision for Payment of Bonds. If Debt Service on the Bonds is paid in accordance with the terms of the Bonds and this Resolution, then all covenants, agreements and other obligations of the Authority to the Bondholders shall thereupon cease, terminate and become void and be discharged and satisfied. Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section if: in case such Bonds are to be redeemed on any date prior to their maturity, the Authority shall, confer on the State Treasurer irrevocable authority for the giving of such notice on behalf of the Authority, 36

86 there shall have been deposited with the State Treasurer (or with the approval of the State Treasurer, deposited with one or more trustees or escrow agents) cash and/or Federal Securities which (assuming due and punctual payment of the principal of and interest on such Federal Securities) will provide money sufficient to pay when due the Debt Service due and to become due on such Bonds on and prior to the redemption date or maturity date thereof, as the case may be, and such Federal Securities are not subject to redemption prior to their respective maturities at the option of the issuer of such securities. All cash and/or Federal Securities so deposited with the State Treasurer or with one or more trustees or escrow agents, shall be held in trust and applied by the State Treasurer, trustee or escrow agent solely to the payment of Debt Service on such Bonds as the same shall become due and payable. At such time as any Bond shall be deemed paid as aforesaid, it shall no longer be secured by or entitled to the benefits of this Resolution, except for the purpose of any payment from such cash and/or Federal Securities deposited with the State Treasurer, or one or more trustees or escrow agents, and the purpose of transfer and exchange as herein provided. Prior to the establishment of any such trust with respect to the Series 2016-A Bonds, the State Treasurer must receive a Favorable Tax Opinion with respect to the establishment of such trust. Any trust established pursuant to this Section may provide for payment of less than all Bonds outstanding, less than all Bonds of a series, or less than all Bonds of any remaining maturity and interest rate within a series. If any trust provides for payment of less than all Bonds of a particular series, maturity and interest rate, the Bonds of such particular series, maturity and interest rate to be paid from the trust shall be selected by the State Treasurer by lot by such method as shall provide for the selection of portions (in Authorized Denominations) of the principal of Bonds for such series, maturity and interest rate of a denomination larger than the smallest authorized denomination. Such selection shall be made within 7 days after such trust is established. This selection process shall be in lieu of the selection process provided for in Section 6.4 if and to the extent that Bonds payable from such trust are to be redeemed prior to maturity. After such selection is made, Bonds that are to be paid from such trust (including Bonds issued in exchange for such Bonds pursuant to the transfer or exchange provisions of this Resolution) shall be identified by a separate CUSIP number or other designation satisfactory to the State Treasurer. The State Treasurer shall notify Holders whose Bonds (or portions thereof) have been selected for payment from such trust and shall direct such Holders to surrender their Bonds to the State Treasurer in exchange for Bonds with the appropriate designation. The selection of Bonds for payment from such trust pursuant to this Section shall be conclusive and binding. The State Treasurer, acting in the capacity of trustee, may name one or more trust companies, national banks, or state banks, located either within or without the State, to act as the State Treasurer's depository for any funds escrowed pursuant to the provisions of this Section. 37

87 All applications of proceeds and monies as provided in this Section, including without limitation the investment thereof and the sale of any related securities, shall be at the direction of the State Treasurer. Any such direction by the State Treasurer may be given at any time, including without limitation at the time of the adoption by the Authority of any resolution relating to the defeasance of any Bond and, once given, such approval shall be irrevocable. 38

88 ARTICLE VIII SALE AND DELIVERY OF BONDS; DISPOSITION OF PROCEEDS; OFFICIAL STATEMENT AND OTHER DOCUMENTS Sale of Bonds. The Series 2016-A Bonds are hereby awarded and sold to the Underwriters at and for a purchase price equal to $ (which price reflects an underwriting discount of $ plus net original issue premium of $ ). The Series 2016-B Bonds are hereby awarded and sold to the Underwriters at and for a purchase price equal to $ (which price reflects an underwriting discount of $ plus net original issue premium of $ ). The execution and delivery by the President or Vice President of the Authority of a Bond Purchase Agreement, between the Authority and the Underwriters (the form of which is attached as Exhibit B to the minutes of the meeting at which this Resolution is adopted and is hereby adopted in all respects as if set out in full herein with such changes as the President or Vice President of the Authority shall approve by his execution thereof) respecting the Bonds is hereby authorized and approved. Disposition of Proceeds from the Sale of the Bonds. The proceeds from the sale of the Series 2016-A Bonds to the Underwriters (less underwriters' discount) shall be applied as follows: the sum of $ shall be deposited into the District 91 Project Fund created in Section 10.2(a) hereof and used to pay costs of the Transportation Projects, for which qualifying District 91 Project Fund Requisitions are delivered; the sum of $ shall be deposited into the District 92 Project Fund created in Section 10.3 (a) hereof and used to pay costs of the Transportation Projects, for which qualifying District 92 Project Fund Requisitions are delivered; the sum of $ shall be deposited in the Series 2016-A Capitalized Interest Fund created in Section 10.5 hereof and used to pay interest in the Series 2016-A Bonds through and including March 15, 2018; and the balance (equaling the sum of $ ) shall be deposited into the Cost of Issuance Fund created in Section 10.7 hereof and used to pay the Cost of Issuance of the Series 2016-A Bonds as directed by the President, Vice President or Secretary of the Authority. The proceeds from the sale of the Series 2016-B Bonds to the Underwriters (less underwriters' discount) shall be applied as follows: 39

89 the sum of $161,565, shall be deposited into the General Fund Rainy Day Account; the sum of $238,434, shall be deposited into the Alabama Trust Fund; the sum of $120,000, to the Alabama Medicaid Agency Fund created in Section 10.4(a) hereof; the sum of $ shall be deposited in the Series 2016-B Capitalized Interest Fund created in Section 10.6 hereof and used to pay interest in the Series 2016-B Bonds through and including March 15, 2018; and the balance (equaling the sum of $ ) shall be deposited into the Cost of Issuance Fund created in Section 10.7 hereof and used to pay the Cost of Issuance of the Series 2016-B Bonds as directed by the President, Vice President or Secretary of the Authority. Official Statement and Other Documents. The Authority consents to and ratifies the use of the Preliminary Official Statement dated November, 2016, with respect to the Bonds. The actions of the President of the Authority in causing the Preliminary Official Statement to be "deemed final" as of its dated date for purposes of Rule 15c2-12 promulgated by the Securities Exchange Commission are hereby ratified and affirmed. Any of the President, Vice President or Secretary of the Authority are hereby authorized and directed to execute and deliver an Official Statement in the name and on behalf of the Authority substantially in the form of the Preliminary Official Statement presented to the Authority at this meeting, with such changes or additions thereto or deletions therefrom as the President, Vice President or Secretary of the Authority shall approve, including those necessary or appropriate to reflect the results of the sale and pricing of the Bonds and the provisions of this Resolution, which approval shall be conclusively evidenced by the execution of the Official Statement by the said President, Vice President or Secretary. The officers of the Authority and any person or persons designated and authorized by any officer of the Authority to act in the name and on behalf of the Authority, or any one or more of them, are authorized to do and perform or cause to be done and performed in the name and on behalf of the Authority such other acts, to pay or cause to be paid on behalf of the Authority such related costs and expenses, and to execute and deliver or cause to be executed and delivered (before, at or after issuance of the Bonds) in the name and on behalf of the Authority such other notices, requests, demands, directions, consents, approvals, orders, applications, certificates, agreements, further assurances, or other instruments or communications, under the seal of the Authority, or otherwise, as they or any of them may deem necessary, advisable, or appropriate in order to permit the issuance, sale, delivery and administration of the Bonds, to carry into effect the intent of the provisions of this Resolution 40

90 and to demonstrate the validity of the Bonds, the absence of any pending or threatened litigation with respect to the Bonds and the transactions contemplated by this Resolution, the exemption of interest on the Series 2016-A Bonds from federal income taxation, and the exemption of interest on the Bonds from State of Alabama income taxation. 41

91 ARTICLE IX CONCERNING THE STATE TREASURER, DEPOSITORIES AND PAYMENT AGENT Concerning the State Treasurer. The State Treasurer shall signify his acceptance of his duties under this Resolution by filing with the Authority written acceptance thereof not later than the date of delivery of the Bonds to the Underwriters. Appointment of Depositories. The Authority hereby authorizes the State Treasurer to appoint one or more Depositories for any or all of the funds and accounts established in this Resolution with respect to the Bonds. Any such Depository must be a "qualified public depository" within the meaning of Title 41, Chapter 14A of the Code of Alabama (1975), as amended, must be a member of the Federal Deposit Insurance Corporation, or such organization as may succeed to the functions and duties of such corporation, and must be a bank or trust company or national banking association having an office in the State and willing and able to accept the appointment on reasonable and customary terms and authorized by law to perform all the duties required by this Resolution. Resignation of Depositories. Any Depository at the time acting hereunder may at any time resign and be discharged from the duties hereby created by giving not less than thirty (30) days' written notice to the State Treasurer, and such resignation shall take effect on the day specified in such notice, unless a successor Depository shall have been appointed by the State Treasurer as hereinafter provided and shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor. Removal of Depositories. Any Depository, or any successor thereof, may be removed without cause at any time by the State Treasurer or the Authority. Successor Depositories. In case any Depository, or any successor thereof, shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Depository or of its property shall be appointed, or if any public officer shall take charge or control of the Depository, or of its property or affairs, a successor may be appointed by the State Treasurer, by an instrument or instruments in writing delivered to such successor Depository with notification thereof being given to the predecessor Depository. Section 9.2 hereof. Any Depository hereafter appointed must satisfy the requirements in 42

92 State Treasurer to Hold Monies in Trust. The State Treasurer is hereby appointed paying agent for the Bonds. The State Treasurer, as paying agent for the Bonds, shall hold in trust for the benefit of the Bondholders any sums held by the State Treasurer for payment of the principal of and interest on the Bonds. 43

93 ARTICLE X CERTAIN FUNDS AND ACCOUNTS Debt Service Fund. There is hereby created with the State Treasurer a "Debt Service Fund", which shall remain in effect until the payment in full of the Bonds and any Additional Bonds hereafter issued. The State Treasurer shall, for each Settlement Payment Year while any of the Bonds or Additional Bonds remain Outstanding, set aside the first Appropriated Funds received for such Settlement Payment Year and cause the moneys so set aside to be deposited into the Debt Service Fund created in Section 10.1(a) until there is on deposit therein an amount equal to the Debt Service payable on the Bonds and any Additional Bonds during such Settlement Payment Year. Appropriated Funds received for a given Settlement Payment Year that are not needed to accomplish or to maintain such required deposits to the Debt Service Fund may be used for any lawful purpose for which such moneys may be applied. If at any time during a given Settlement Payment Year the Authority determines that the amount held in the Debt Service Fund for such Settlement Payment Year is greater than the amount so required to be held, then, to the extent of such surplus, moneys may be withdrawn from the Debt Service Fund and used by the Authority for any lawful purpose for which such moneys may be applied. The State Treasurer shall cause the moneys deposited into the Debt Service Fund to be applied for the payment of the principal, interest and premium (if any) on the Bonds and any Additional Bonds as such principal, interest and premium (if any) becomes due and payable. The State Treasurer, as paying agent for the Bonds, may cause any money on deposit in the Debt Service Fund to be invested in Permitted Investments or maintained in an interest bearing deposit account with a Depository. All such investments must mature or be subject to redemption at the option of the holder on or prior to the respective date when cash funds will be required. Earnings on such investments or deposits shall be deemed at all times a part of the Debt Service Fund, and any such amounts on deposit in the Debt Service Fund shall be credited to the amount required to be deposited into the Debt Service Account pursuant to subsection (b) of this Section (d) The State Treasurer may establish additional accounts and sub-accounts within the Debt Service Fund as may be necessary or convenient to perform its duties under this Resolution. District 91 Project Fund. There is hereby established with the State Treasurer a special fund which shall be called the "District 91 Project Fund" (herein called the "District 91 Project Fund"). A deposit into the District 91 Project Fund shall be made with proceeds of the Series 2016-A Bonds pursuant to Section 8.2(a) hereof. Earnings on investments in the District 91 Project Fund shall 44

94 be retained therein and used for the purposes for which the District 91 Project Fund is herein established. Money in the District 91 Project Fund shall be paid out by the State Treasurer from time to time to pay (whether through direct payment or through reimbursement) the cost of Transportation Projects within Alabama Department of Transportation District 91 of the Southwest Region for Highway 98/Highway 158 from the Mississippi state line to Interstate 65, with each such payment to be made pursuant to a warrant issued in response to a requisition, the form of which is attached as Exhibit C hereto (herein called a "District 91 Project Fund Requisition"), signed by or on behalf of an Authorized Alabama Department of Transportation Representative containing, with respect to each payment requested thereby, the following: a statement of the amount requested to be paid or reimbursed, the name and address of the person or entity (which may be the Alabama Department of Transportation or any other State entity or agency) to whom such payment or reimbursement is due, and a general description of the particular cost which is to be paid or reimbursed pursuant to such requisition; and a certification that (1) District 91 Project Fund moneys expended pursuant to such requisition will be expended for Transportation Projects within Alabama Department of Transportation District 91 of the Southwest Region for Highway 98/Highway 158 from the Mississippi state line to Interstate 65 authorized in the Enabling Law, and (2) the payment requested in such requisition has not formed the basis for any previous requisition for the disbursement of moneys from the District 91 Project Fund or any previous payment out of the proceeds derived by the Authority from the sale of any of the Series 2016-A Bonds. In addition, each withdrawal of funds from the District 91 Project Fund shall be approved by the President, Vice President or Secretary of the Authority. The State Treasurer shall be fully protected in making disbursements and payments out of the District 91 Project Fund upon presentation of warrants that have been issued in response to requisitions that have been signed by an Authorized Alabama Department of Transportation Representative and approved by the President, Vice President or Secretary of the Authority. The State Treasurer is hereby authorized and directed to invest District 91 Project Fund moneys in Permitted Investments from time to time per the written instructions of the President, Vice President or Secretary of the Authority or the Chief Financial Officer of the Alabama Department of Transportation specifying the type or types of Permitted Investments to be acquired and the maturity or maturities thereof or to maintain such amounts in an interest bearing deposit account with a Depository. All income derived from Permitted Investments or from amounts maintained in a deposit account shall, immediately upon receipt thereof, be deposited into the District 91 Project Fund. The State Treasurer may from time to time sell or 45

95 otherwise convert such securities or certificates into cash if in his sole discretion he deems such conversion necessary or desirable or if such sale or conversion is necessary or desirable for payment or reimbursement in accordance with a District 91 Project Fund Requisition presented pursuant to the provisions of this Section The State Treasurer shall be fully protected in making any such investment, sale or conversion. Anything in the foregoing to the contrary notwithstanding, investment earnings deposited into the District 91 Project Fund during any given Bond Year shall not be withdrawn therefrom until after the transfer to the Rebate Fund with respect to such Bond Year (and payment of any related Rebate Consultant fees, if any) provided for in Section 10.8(d) hereof. Upon certification by the Authority that the District 91 Transportation Projects contemplated to be financed from the proceeds of the Series 2016-A Bonds have been completed, any moneys remaining in the District 91 Project Fund shall be applied to the redemption and prepayment of the Series 2016-A Bonds on the earliest possible date or shall be deposited in the Debt Service Fund and used to pay principal coming due on the next succeeding September 15, as directed in writing by the President, Vice President or Secretary of the Authority. Pending any such redemption or payment, such moneys shall be invested at a yield not in excess of the yield on the Series 2016-A Bonds. District 92 Project Fund. There is hereby established with the State Treasurer a special fund which shall be called the "District 92 Project Fund" (herein called the "District 92 Project Fund"). A deposit into the District 92 Project Fund shall be made with proceeds of the Series 2016-A Bonds pursuant to Section 8.2(a) hereof. Earnings on investments in the District 92 Project Fund shall be retained therein and used for the purposes for which the District 92 Project Fund is herein established. Money in the District 92 Project Fund shall be paid out by the State Treasurer from time to time to pay (whether through direct payment or through reimbursement) the cost of Transportation Projects within Alabama Department of Transportation District 92 of the Southwest Region, with each such payment to be made pursuant to a warrant issued in response to a requisition, the form of which is attached as Exhibit D hereto (herein called a "District 92 Project Fund Requisition"), signed by or on behalf of an Authorized Alabama Department of Transportation Representative containing, with respect to each payment requested thereby, the following: a statement of the amount requested to be paid or reimbursed, the name and address of the person or entity (which may be the Alabama Department of Transportation or any other State entity or agency) to whom such payment or reimbursement is due, and a general description of the particular cost which is to be paid or reimbursed pursuant to such requisition; and a certification that (1) District 92 Project Fund moneys expended pursuant to such requisition will be expended for Transportation Projects within Alabama Department of Transportation 46

96 District 92 of the Southwest Region authorized in the Enabling Law, and (2) the payment requested in such requisition has not formed the basis for any previous requisition for the disbursement of moneys from the District 92 Project Fund or any previous payment out of the proceeds derived by the Authority from the sale of any of the Series 2016-A Bonds. In addition, each withdrawal of funds from the District 92 Project Fund shall be approved by the President, Vice President or Secretary of the Authority. The State Treasurer shall be fully protected in making disbursements and payments out of the District 92 Project Fund upon presentation of warrants that have been issued in response to requisitions that have been signed by an Authorized Alabama Department of Transportation Representative. The State Treasurer is hereby authorized and directed to invest District 92 Project Fund moneys in Permitted Investments from time to time per the written instructions of the President, Vice President or Secretary of the Authority or the Chief Financial Officer of the Alabama Department of Transportation specifying the type or types of Permitted Investments to be acquired and the maturity or maturities thereof or to maintain such amounts in an interest bearing deposit account with a Depository. All income derived from Permitted Investments or from amounts maintained in a deposit account shall, immediately upon receipt thereof, be deposited into the District 92 Project Fund. The State Treasurer may from time to time sell or otherwise convert such securities or certificates into cash if in his sole discretion he deems such conversion necessary or desirable or if such sale or conversion is necessary or desirable for payment or reimbursement in accordance with a District 92 Project Fund Requisition presented pursuant to the provisions of this Section The State Treasurer shall be fully protected in making any such investment, sale or conversion. Anything in the foregoing to the contrary notwithstanding, investment earnings deposited into the District 91 Project Fund during any given Bond Year shall not be withdrawn therefrom until after the transfer to the Rebate Fund with respect to such Bond Year (and payment of any related Rebate Consultant fees, if any) provided for in Section 10.8(d) hereof. Upon certification by the Authority that the District 92 Transportation Projects contemplated to be financed from the proceeds of the Series 2016-A Bonds have been completed, any moneys remaining in the District 92 Project Fund shall be applied to the redemption and prepayment of the Series 2016-A Bonds on the earliest possible date or shall be deposited in the Debt Service Fund and used to pay principal coming due on the next succeeding September 15, as directed in writing by the President, Vice President or Secretary of the Authority. Pending any such redemption or payment, such moneys shall be invested at a yield not in excess of the yield on the Series 2016-A Bonds. Alabama Medicaid Agency Fund There is hereby established with the State Treasurer a special fund which shall be called the "Alabama Medicaid Agency Fund" (herein called the "Alabama Medicaid Agency Fund"). A deposit into the Alabama Medicaid Agency Fund shall be made with proceeds of the Series 2016-B Bonds pursuant to Section 8.2(b) hereof. Earnings on investments in the 47

97 Alabama Medicaid Agency Fund shall be transferred to the Alabama Trust Fund to repay amounts transferred to the State General Fund in fiscal years 2013, 2014 and 2015 pursuant to Section 4 of Amendment 856 to the Constitution of Alabama of 1901, as amended, and such transfer shall be in addition to the amount so transferred pursuant to Section 8.2(b) hereof. From the money in the Alabama Medicaid Agency Fund, the State Treasurer shall distribute, without any further need for direction, (i) $15,000,000 to the Alabama Medicaid Agency during the Fiscal Year ending September 30, 2017 and (ii) $105,000,000 to the Alabama Medicaid Agency during the Fiscal Year ending September 30, The State Treasurer is hereby authorized and directed to invest Alabama Medicaid Agency Fund moneys in Permitted Investments from time to time per the written instructions of the President, Vice President or Secretary of the Authority specifying the type or types of Permitted Investments to be acquired and the maturity or maturities thereof or to maintain such amounts in an interest bearing deposit account with a Depository. All income derived from Permitted Investments or from amounts maintained in a deposit account shall, immediately upon receipt thereof, be deposited into the Alabama Medicaid Agency Fund and shall remain in such fund until transferred to the Alabama Trust Fund pursuant to Section 10.4(a) hereof. The State Treasurer may from time to time sell or otherwise convert such securities or certificates into cash if in his sole discretion he deems such conversion necessary or desirable or if such sale or conversion is necessary or desirable for payment of the amounts set forth in Section 10.4(b) hereof. The State Treasurer shall be fully protected in making any such investment, sale or conversion. Series 2016-A Capitalized Interest Fund. There is hereby established with the State Treasurer a special fund which shall be called the "Series 2016-A Capitalized Interest Fund." A deposit into the Series 2016-A Capitalized Interest Fund shall be made with proceeds of the Series 2016-A Bonds pursuant to Section 8.2(a) hereof. The State Treasurer is hereby authorized and directed to invest Series 2016-A Capitalized Interest Fund moneys in Permitted Investments or to maintain such amounts in an interest bearing deposit account with a Depository; provided such investments shall take into account the amounts to be applied on the dates specified below in order to ensure that sufficient moneys are available for transfer to the Debt Service Fund on such dates. Earnings on investments of amounts in the Series 2016-A Capitalized Interest Fund or from such amounts maintained in a deposit account shall be retained in the Series 2016-A Capitalized Interest Fund and used for the purposes for which the Series 2016-A Capitalized Interest Fund is herein established. Moneys in the Series 2016-A Capitalized Interest Fund shall be transferred, without any further need for direction, to the Debt Service Fund and applied by the State Treasurer to the payment of interest on the Series 2016-A Bonds as follows: 48

98 Interest Payment Date Capitalized Interest for Series 2016-A Bonds March 15, 2017 $ September 15, 2017 March 15, 2018 In the event there are moneys remaining in the Series 2016-A Capitalized Interest Fund after the payment of interest due on March 15, 2018, then such moneys shall be applied to the payment of interest in the Series 2016-A Bonds on September 15, Series 2016-B Capitalized Interest Fund. There is hereby established with the State Treasurer a special fund which shall be called the "Series 2016-B Capitalized Interest Fund." A deposit into the Series 2016-B Capitalized Interest Fund shall be made with proceeds of the Series 2016-B Bonds pursuant to Section 8.2(b) hereof. The State Treasurer is hereby authorized and directed to invest Series 2016-B Capitalized Interest Fund moneys in Permitted Investments or to maintain such amounts in an interest bearing deposit account with a Depository; provided such investments shall take into account the amounts to be applied on the dates specified below in order to ensure that sufficient moneys are available for transfer to the Debt Service Fund on such dates. Earnings on investments in the Series 2016-B Capitalized Interest Fund shall be retained therein and used for the purposes for which the Series 2016-B Capitalized Interest Fund is herein established. Moneys in the Series 2016-B Capitalized Interest Fund shall be transferred, without any further need for direction, to the Debt Service Fund and applied by the State Treasurer to the payment of interest on the Series 2016-B Bonds as follows: Interest Payment Date Capitalized Interest for Series 2016-B Bonds March 15, 2017 $ September 15, 2017 March 15, 2018 In the event there are moneys remaining in the Series 2016-B Capitalized Interest Fund after the payment of interest due on March 15, 2018, then such moneys shall be applied to repay the Alabama Trust Fund for amounts transferred to the State General Fund in fiscal years 2013, 2014 and 2015 pursuant to Section 4 of Amendment 856 to the Constitution of Alabama of 1901, as amended, and such transfer shall be in addition to the amount so transferred pursuant to Section 8.2(b) hereof. Cost of Issuance Fund. There is hereby established with the State Treasurer a special fund which shall be called the "BP Settlement Revenue Bonds, Series 2016-A and Series 2016-B Cost of Issuance Fund." 49

99 Deposits into the Cost of Issuance Fund shall be made with proceeds of the Bonds pursuant to Section 8.2(a) and (b) hereof. Such monies shall be used to pay the Cost of Issuance of the Bonds. Any monies remaining in the Cost of Issuance Fund after the payment of all Cost of Issuance (as certified by the President, Vice President or Secretary of the Authority) shall be transferred as follows: the amount attributable to the Series 2016-A Bonds (i.e., an amount equal to the total monies remaining in the Cost of Issuance Fund multiplied by a fraction the numerator of which is the sale proceeds of the Series 2016-A Bonds and the denominator of which is the total sale proceeds of the Bonds) shall be transferred to the Debt Service Fund and used to pay Debt Service in the Series 2016-A Bonds on the next Interest Payment Date; and the amount attributable to the Series 2016-B Bonds (i.e., an amount equal to the total monies remaining in the Cost of Issuance Fund multiplied by a fraction the numerator of which is the sale proceeds of the Series 2016-B Bonds and the denominator of which is the total sale proceeds of the Bonds) shall be transferred to the Alabama Trust Fund to repay amounts transferred to the State General Fund in fiscal years 2013, 2014 and 2015 pursuant to Section 4 of Amendment 856 to the Constitution of Alabama of 1901, as amended, and such transfer shall be in addition to the amount so transferred pursuant to Section 8.2(b) hereof. Rebate Fund. There is hereby established with the State Treasurer a special fund which shall be called the "BP Settlement Revenue Bonds, Series 2016-A Rebate Fund" (the "Rebate Fund"). The State Treasurer shall be the custodian for the Rebate Fund. A deposit into the Rebate Fund shall be made annually if and to the extent required by the provisions of paragraph (d) of this Section Money on deposit in the Rebate Fund shall be invested in Permitted Investments or maintained in an interest bearing deposit account with a Depository, and all investment income shall be retained in the Rebate Fund. Moneys on deposit in the Rebate Fund shall be disbursed by the State Treasurer from time to time for the purpose of paying any Required Rebate, but only upon receipt of a warrant therefor that shall have been approved by the President, Vice President or Secretary of the Authority stating, with respect to each such payment, the amount requested to be paid and the name and address of the agency of the United States to whom such payment is to be made. Within 120 days after the end of each Bond Year, the Authority shall furnish to the State Treasurer a report of a Rebate Consultant stating the amount of the Required Rebate for a Bond Year. Upon receipt of such report, the State Treasurer shall immediately transfer, from the District 91 Project Fund, the District 92 Project Fund or other available funds into the Rebate Fund, the amount of the Required Rebate for such Bond Year. The fees and expenses of the Rebate Consultant, if any, shall be paid out of moneys in the District 91 Project Fund, the District 92 Project Fund or other available funds at the time that any such transfer to the Rebate Fund is made. 50

100 Funds Held by State Treasurer as Paying Agent. Any cash on deposit in the Debt Service Fund, the District 91 Project Fund, the District 92 Project Fund, the Alabama Medicaid Agency Fund, the Series 2016-A Capitalized Interest Fund, the Series 2016-B Capitalized Interest Fund, the Costs of Issuance Fund, the Rebate Fund or any of the other funds or accounts herein created and held by the State Treasurer, as paying agent for the Bonds, shall be impressed with a trust for the purpose for which such funds or accounts are created and shall be kept on deposit in U.S. dollar denominated deposit accounts and certificates of deposit with banks or savings associations that are qualified public depositories under Chapter 14A of Title 41 of the Code of Alabama 1975, as amended. Any money held by the State Treasurer, as paying agent for the Bonds, in the Debt Service Fund for the payment of debt service on the Bonds or any Additional Bonds and remaining unclaimed for 3 years after such debt service has become due and payable shall be paid in accordance with applicable Alabama law relating to unclaimed property. 51

101 ARTICLE XI AMENDMENT OR MODIFICATIONS OF THE RESOLUTION Supplemental Resolutions Without Bondholder Consent. Without the consent of or notice to any Bondholders, the Authority may, at any time and from time to time, adopt such Supplemental Resolutions as shall not be inconsistent with the terms and provisions hereof, for any one or more of the following purposes: To add to the covenants and agreements of the Authority herein contained other covenants and agreements thereafter to be observed and performed by the Authority, provided that such covenants and agreements shall not either expressly or impliedly limit or restrict any of the obligations of the Authority contained in this Resolution; To provide for the surrender by the Authority of any right or power conferred in this Resolution on the Authority, or to grant to or confer upon the Bondholders or for the benefit of the Bondholders any right, power or authority that may lawfully be granted to or conferred upon the Bondholders. To cure or correct any ambiguity, defect or inconsistent provision contained in this Resolution or in any Supplemental Resolution or to make any provisions with respect to matters arising under this Resolution or any Supplemental Resolution for any other purpose if such provisions are necessary or desirable and are not inconsistent with the provisions of this Resolution or any Supplemental Resolution and do not adversely affect the interests of the Holders of the Bonds or any Additional Bonds; To subject to the pledge herein contained additional property or revenues or to identify more precisely any of the property or revenues subject to the lien hereof; To incorporate modifications requested by any securities rating service in order to obtain or maintain a particular credit rating on the Bonds or any Additional Bonds so long as such modifications do not adversely impact the interests of the Holders of the Bonds or any Additional Bonds; or To comply with any mandatory provision of State or federal law (including compliance with any requirement of federal law that is a condition to the exclusion of the interest on the Series 2016-A Bonds or Additional Bonds from gross income for purposes of federal income taxation). Supplemental Resolutions Requiring Bondholder Consent. In addition to those Supplemental Resolutions permitted by Section 11.1 hereof, the Authority may, at any time and from time to time, with the written consent of the Holders of a majority in principal amount of the Bonds and Additional Bonds then Outstanding, adopt such Supplemental Resolutions as shall be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Resolution or in any Supplemental Resolution; provided 52

102 that, without the written consent of the Holder of each Bond and Additional Bond affected, none of the following shall be permitted: A change of the stated due date or mandatory redemption date of the principal of, or any installment of interest on, any Bond or Additional Bond, or a reduction of the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof; Except in the case of Additional Bonds the creation of a lien or charge on the Pledged Funds ranking prior to or on a parity with the lien and charge thereon contained in this Resolution; Additional Bonds; or The establishment of preferences or priorities as between any Bonds and A reduction in the aggregate amount of the Bonds and Additional Bonds Outstanding the Holders of which are required to consent to such Supplemental Resolution. Notices with Respect to Certain Changes in Resolution. If at any time the Authority shall determine to adopt any Supplemental Resolution requiring the written consent of the Holders of all or a majority in principal amount of the Bonds and Additional Bonds then Outstanding, the Authority shall cause notice of the proposed Supplemental Resolution to be forwarded by United States registered or certified mail, postage prepaid, to each Holder of a Bond or Additional Bond. Such notice shall briefly set forth the nature of the proposed Supplemental Resolution and shall state that copies thereof are on file at the office of the State Treasurer for inspection by all Bondholders. If the Holders of all or a majority (as applicable) in aggregate principal amount of the Bonds and Additional Bonds Outstanding at the time of the adoption of any such Supplemental Resolution shall consent to and approve the adoption thereof, then no Holder of any Bond or Additional Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or restrain the Authority from taking any action pursuant to the provisions thereof. Favorable Tax Opinion Required. No Supplemental Resolution described in Sections 11.1 or 11.2 hereof may be adopted unless the Authority shall first deliver to the State Treasurer a Favorable Tax Opinion. 53

103 ARTICLE XII REPRESENTATIONS AND COVENANTS General Representations. The Authority makes the following representations and warranties as the basis for the undertakings on its part herein contained: Under the provisions of the Enabling Law, it has the power to consummate the transactions described herein to which it is a party. (b) This Resolution and the Bonds constitute legal, valid and binding obligations of the Authority and are enforceable against it in accordance with the terms of such documents, except as enforcement thereof may be limited by sovereign immunity, bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights and general principles of equity, including the exercise of judicial discretion in appropriate cases. (c) The lien imposed by this Resolution on the Pledged Funds is a firstpriority lien, and there is no pledge, assignment or other lien in effect with respect to the Pledged Funds other than the lien imposed by this Resolution for the benefit of the Bonds and any Additional Bonds hereafter issued. (d) The lien imposed by this Resolution on the Series 2016-A Capitalized Interest Fund is a first-priority lien, and there is no pledge, assignment or other lien in effect with respect to the Series 2016-A Capitalized Interest Fund other than the lien imposed by this Resolution for the benefit of the Series 2016-A Bonds. (e) The lien imposed by this Resolution on the Series 2016-B Capitalized Interest Fund is a first-priority lien, and there is no pledge, assignment or other lien in effect with respect to the Series 2016-B Capitalized Interest Fund other than the lien imposed by this Resolution for the benefit of the Series 2016-B Bonds. Payment of Bonds. The Authority, subject to the limitations of Section 7.1 hereof, shall duly and punctually pay or cause to be paid the principal, interest and premium (if any) of every Bond, at the dates and places and in the manner provided herein and in the Bonds, according to the true intent and meaning thereof. The Authority will not extend or consent to the extension of the time for payment of Debt Service on the Bonds, unless such extension is consented to by the Holders of the Bonds affected. Accounts. The Authority shall keep, and the State Treasurer is hereby appointed to keep on behalf of the Authority, proper books of record and account in which complete and correct entries shall 54

104 be made of its transactions relating to all Permitted Investments and all funds established by this Resolution. Corporate Existence. The Authority will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. Agreement. Covenants with Respect to Appropriated Funds and Settlement The Authority will request that the State not consent to any modification of the schedule of payments to the State set as forth in the Settlement Agreement unless (i) the Annual Settlement Agreement Revenues to be received by the State in each Settlement Payment Year pursuant to the modified payment schedule will not be less than the Annual Debt Service in each such Settlement Payment Year or (ii) the Authority obtains the consent of the Holders of all Bonds and Additional Bonds Outstanding. Whenever necessary to ensure timely receipt of the BP Settlement Revenues, the Authority shall request that the appropriate State officials pursue all appropriate rights and remedies of the State under the Settlement Agreement, the Primary Guaranty, the Secondary Guaranty, and any alternative form of financial assurance delivered pursuant to Section 5.6 of the Settlement Agreement. Whenever the consent of the State is required under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty, or otherwise requested by a party thereto, to approve any action of any party or a modification of any right of the State under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty, the Authority will request that the State withhold its consent unless the Authority determines in good faith that providing its consent is in the best interest of Bondholders. Notwithstanding the foregoing, the Authority will request that the State not consent to (i) any assignment of the Primary Guaranty or the Secondary Guaranty or the release of BP Corporation North America Inc. or BP p.l.c., respectively, from their obligations thereunder pursuant to Section 5.5 of the Settlement Agreement or (ii) the modification and/or replacement of the Primary Guaranty or Secondary Guaranty with any alternative form of financial assurance pursuant to Section 5.6 of the Settlement Agreement, unless, in any such case, the Authority first obtains either (1) written confirmation from Moody's and S&P (if such rating agency maintains a rating on the Bonds or any Additional Bonds at such time) that the proposed action will not result in a reduction by such rating agency of the rating assigned to the Bonds or any Additional Bonds Outstanding or (2) the consent of 100% in principal amount of the Holders of any Bonds and Additional Bonds Outstanding at such time. Upon the occurrence of a "Change In Control" or an "Act of Insolvency", each as defined in the Settlement Agreement, the Authority shall request the appropriate State officials to elect to accelerate the schedule of payments to the State under the Settlement Agreement unless the Authority, in its reasonable judgment, determines that an election to accelerate is not in the best interest of the Bondholders. 55

105 The State, not the Authority, is the party that must exercise rights and remedies under the Settlement Agreement, the Primary Guaranty and the Secondary Guaranty, and no default shall result hereunder if the appropriate State officials fail to follow the Authority's requests. The Authority and the State may require the Bondholders to provide reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by them in exercising any rights or pursuing any remedies under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty for the benefit of Bondholders. The Authority shall not be liable to Bondholders for any decisions or actions with respect to the exercise of rights and remedies under the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty made or taken in good faith and in compliance with this Section 12.5, including, without limitation, any decision to request that the State consent or not consent to (i) any actions for which consent may be required by, or requested under, the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty or (ii) any proposed modifications to the Settlement Agreement, the Primary Guaranty or the Secondary Guaranty. 56

106 ARTICLE XIII EVENTS OF DEFAULT Events of Default Defined. Any of the following shall be "Events of Default" under this Resolution, and the term "Event of Default" shall mean, whenever it is used in this Resolution, any one or more of the following conditions or events: failure by the Authority to pay the principal of or the interest or premium (if any) on any Bond or Additional Bond as and when the same shall become due as therein and herein provided (whether at maturity, upon mandatory redemption prior to maturity or otherwise); failure by the Authority to perform or observe any agreement, covenant or condition required by this Resolution or any Supplemental Resolution to be performed or observed by it (other than its agreement to pay the principal of and the interest and premium, if any, on the Bonds and Additional Bonds) after thirty (30) days' written notice to it of such failure given by any Bondholder, unless during such period or any extension thereof the Authority has commenced and is diligently pursuing appropriate corrective action; or the filing of any petition by or against the Authority under the United States Bankruptcy Code or under any other similar law or statute, the appointment by a court of competent jurisdiction of a receiver for the Authority or for a substantial part of its properties or funds, or approval by a court of competent jurisdiction of any petition for rearrangement or readjustment of the obligations of the Authority under any provisions of the bankruptcy laws of the United States of America or the State of Alabama. Remedies on Default. Upon the occurrence and continuation of any Event of Default, any Bondholder or Bondholders shall have the right (a) to the extent permitted by law, to sue on the Bonds and Additional Bonds, (b) by mandamus, suit or other proceedings, to enforce or compel performance of all agreements of the Authority in this Resolution or any Supplemental Resolution, (c) by action or suit in equity, to require the Authority to account as if it were the trustee of an express trust for the Bondholders, and (d) by action or suit in equity, to enjoin any act or things which may be unlawful or in violation of the rights of the Bondholders. Delay No Waiver. No delay or omission by any Bondholder to exercise any available right, power or remedy hereunder shall impair or be construed as a waiver thereof or an acquiescence in the circumstances given rise thereto; every right, power or remedy given herein to the Bondholders may be exercised from time to time and as often as deemed expedient. 57

107 ARTICLE XIV MISCELLANEOUS Tax Matters. The President, Vice President or Secretary of the Authority is hereby authorized to execute the Tax Compliance Agreement in connection with the issuance of the Series 2016-A Bonds. The Authority hereby agrees to comply with all covenants contained in such Tax Compliance Agreement. The Authority recognizes that the Holders of the Series 2016-A Bonds from time to time will have accepted them on, and paid therefor a price which reflects, the understanding that interest on the Series 2016-A Bonds is excludable from gross income for federal income tax purposes under the laws in force at the time the Series 2016-A Bonds shall have been delivered. In this connection, the Authority covenants (i) that it will not take or omit to take any action if the taking of such action or the failure to take such action, as the case may be, may render the interest on any of the Series 2016-A Bonds includable in gross income for purposes of federal income taxation, and (ii) that it will use the "proceeds" of the Series 2016-A Bonds and any other funds of the Authority in such a manner that the use thereof, as reasonably expected by the Authority at the time of issuance of the Series 2016-A Bonds, would not cause the Series 2016-A Bonds to be "arbitrage bonds" under Section 103(b)(2) and Section 148 of the Code. The Authority further covenants and agrees that it will not permit at any time any "proceeds" of the Series 2016-A Bonds or any other funds of the Authority to be used, directly or indirectly, in a manner which would result in the inclusion of the interest on any Series 2016-A Bond in gross income for purposes of federal income taxation by reason of the classification of such Series 2016-A Bond as a "private activity bond" within the meaning of Section 141(a) of the Code. The officers and employees of the Authority shall execute and deliver from time to time, on behalf of the Authority, such certificates, instruments and documents as shall be deemed necessary or advisable to evidence compliance by the Authority with said Section 103(b)(2), said Section 148 and said Section 141(a) and the regulations thereunder with respect to the use of the proceeds of the Series 2016-A Bonds. Such certificates, instruments and documents may contain such stipulations as shall be necessary or advisable in connection with the stated purpose of this section and the foregoing provisions hereof, and the Authority hereby covenants and agrees to comply with the provisions of any such stipulations throughout the term of the Series 2016-A Bonds. The President, Vice President and the Secretary of the Authority are further authorized to adopt a policy respecting post-issuance compliance with the requirements of the Code and the regulations promulgated thereunder. In connection with the issuance of any obligations of the Authority, the interest on which is intended to be exempt from federal taxation, the Authority hereby designates the President, Vice President and the Secretary of the Authority to declare official intent on behalf of the Authority for purposes of the Code (including, specifically, U.S. Department of Treasury Regulations Section (e)). 58

108 Authorization of Continuing Disclosure Agreement and Related Documents and Actions. The President, Vice President or Secretary of the Authority is hereby authorized and directed to execute and deliver, on behalf of the Authority, a Continuing Disclosure Agreement, for the benefit of the beneficial owners of the Bonds, in substantially the form presented to the meeting at which this Resolution is adopted (which form shall be attached as Exhibit E to the minutes of the meeting at which this Resolution is adopted and is hereby adopted in all respects as if set out in full herein). The Secretary of the Authority is hereby authorized to affix to the said Continuing Disclosure Agreement the seal of the Authority and to attest the same. The said Continuing Disclosure Agreement is to be entered into contemporaneously with the issuance of the Bonds in order to assist the Underwriters in complying with Rule 15c2-12 of the Securities and Exchange Commission. The rights of enforcement of the said Continuing Disclosure Agreement shall be as provided therein, and in no event shall a default by the Authority thereunder constitute a default hereunder. The President, Vice President and Secretary of the Authority are each hereby authorized and directed to execute, seal, attest and deliver such other documents and certificates and to take such other actions on behalf of the Authority as may be necessary to consummate the sale and issuance of the Bonds and to carry out fully the transactions contemplated by this Resolution. Provisions of Resolution a Contract; Governing Law. The terms, provisions and conditions set forth in the Enabling Law and this Resolution constitute a contract between the Authority and the Holders of the Bonds and shall remain in effect until the Debt Service on the Bonds shall have been paid in full or provision for such payment has been made in accordance with Section 7.3. This Resolution and the Bonds shall be governed and construed in accordance with the laws of the State. Confirmation of Professionals and Actions Taken in Connection with the Sale of the Bonds. The Directors hereby ratify and confirm the retention of Rice Advisory LLC, as financial advisor to the Authority, Balch & Bingham LLP, as Bond Counsel to the Authority, and Butler Snow LLP, as Disclosure Counsel to the Authority, in connection with the issuance of the Bonds, and any other actions taken or expenses incurred with respect to the issuance and sale of the Bonds. The fees and expenses of such firms relating to the issuance of the Bonds shall be paid out of the amounts available therefor in the Cost of Issuance Fund. Severability Clause. If any provision in this Resolution or in the Bonds shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 59

109 Notices to Bondholders; Waiver. Where this Resolution provides for notice to any Bondholder of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to such Holder at the address of such Holder as it appears in the applicable Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Bondholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Bondholder shall affect the sufficiency of such notice with respect to other Bondholders. Where this Resolution provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Bondholders shall be filed with the Secretary of the Authority, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Repeal of Conflicting Provisions. All ordinances, resolutions and orders or parts thereof in conflict with this Resolution are, to the extent of such conflict, hereby repealed. Limitation on Rights. Except as otherwise expressly provided in this Resolution, nothing herein or in the Bonds contained is intended or shall be construed to give any person other than the Authority, the State Treasurer, the Underwriters, and the Holders of the Bonds any legal or equitable right, remedy or claim under or in respect to this Resolution, or under any provision herein contained, this Resolution being for the sole and exclusive benefit of the Authority, the State Treasurer, the Underwriters, and the Holders of the Bonds hereby authorized. The obligations herein undertaken shall be binding upon and shall inure to the benefit of the Authority, its successors and assigns. Corporate Seal. The Directors hereby adopt as the corporate seal of the Authority the seal presented at the meeting at which this Resolution is adopted. An impression of said seal shall be affixed to the minutes of the meeting at which this Resolution is adopted. Effect of Headings and Table of Contents. The article and section headings herein and in the table of contents hereof are for convenience only and shall not affect the construction hereof. Approved this the day of,

110 APPENDIX B SETTLEMENT AGREEMENT AND THE GUARANTY AGREEMENTS

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112 SETTLEMENT AGREEMENT

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114 SETTLEMENT AGREEMENT BETWEEN THE GULF STATES AND THE BP ENTITIES WITH RESPECT TO ECONOMIC AND OTHER CLAIMS ARISING FROM THE DEEPWATER HORIZON INCIDENT I. RECITALS 1.1 Whereas, on the evening of April 20, 2010, a blowout, explosions, and fire occurred aboard the mobile offshore drilling unit Deepwater Horizon as it was in the process of temporarily abandoning a well, known as the Macondo Well, it had drilled within Block 252, Mississippi Canyon, on the Outer Continental Shelf off the coast of Louisiana; 1.2 Whereas, as a result of the blowout, explosions, and fire, oil and other substances were released into the Gulf of Mexico from approximately April 20, 2010 until July 15, 2010; 1.3 Whereas, pursuant to federal regulation, BPXP was the operator of the Macondo Well as of April 20, 2010; 1.4 Whereas, the release of oil and hydrocarbons originating in the Macondo Well and discharging from the Deepwater Horizon (and its appurtenances) on and after April 20, 2010 resulted in the presence of oil and other substances in the waters of the Gulf of Mexico and on beaches, marshes, and other land along the shore of the Gulf of Mexico, and, as a consequence, also resulted in the largest response, containment, cleanup, and restoration effort in the history of the United States; 1.5 Whereas, the State of Alabama filed a complaint on August 12, 2010, captioned Alabama v. BP PLC, Case No. 2:10-cv-690 (M.D. Ala), that was transferred to MDL 2179, where Alabama filed a first amended complaint on April 7, 2011, captioned Alabama v. BP PLC, Case No. 2:10-cv-4182 (E.D. La); 1.6 Whereas, the State of Florida filed a complaint on April 20, 2013, captioned Florida v. BP Exploration & Production Inc., et al., Case No. 5:13-cv (N.D. Fla.), that was transferred to MDL 2179; 1.7 Whereas, the State of Louisiana filed a first amended complaint on April 19, 2011, captioned Louisiana v. BP Exploration & Production, Inc., et al., Case Nos. 11-cv-0516, 10- cv (E.D. La.), in MDL 2179; 1.8 Whereas, the State of Mississippi filed a complaint on April 18, 2013, captioned Hood v. BP Exploration & Production Inc., et al., Case No. 1:13-cv (S.D. Miss.), that was transferred to MDL 2179; 1.9 Whereas, the State of Texas filed a complaint on May 17, 2013, captioned Texas v. BP 1

115 Exploration & Production Inc., et al., Case No. 1:13-cv-315 (E.D. Tex.), that was transferred to MDL 2179, where Texas filed an amended complaint on June 18, 2013, captioned Texas v. BP Exploration & Production Inc., et al., Case No. 13-cv-4677 (E.D. La.); 1.10 Whereas, on November 14, 2011, the Court entered an order dismissing Alabama s and Louisiana s claims under state law, including for civil penalties, as being pre-empted by the federal Clean Water Act, In re Oil Spill by Oil Rig Deepwater Horizon in the Gulf of Mexico, No , 2011 WL (E.D. La. Nov. 14, 2011); 1.11 Whereas, the States of Alabama, Florida, Louisiana, Mississippi, and Texas and various affiliates collectively have asserted numerous claims against BPXP and other BP Entities that they allege arise from or are otherwise related to the Deepwater Horizon Incident, including, but not limited to, claims for economic loss, losses or damages related to Moratoria, losses related to closures of fishing and harvesting of natural resources, business interruption, breach of contract, loss of royalties, lost taxes and revenues, property damage, lost tourism revenue, response and removal costs, operating and other costs, other economic damages, punitive damages, and attorneys fees, costs, and expenses; 1.12 Whereas, those claims have been consolidated for coordinated and consolidated pretrial proceedings in the multidistrict litigation, In Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, MDL No (E.D. La.), United States v. BP Exploration & Production Inc., et al., No. 2:10-cv (E.D. La.), which proceedings have included discovery and other pretrial matters with respect to state compensatory claims in the Alabama compensatory trial and discovery and the completion of multiple phases of the limitation and liability trial conducted by the Court pursuant to certain pretrial orders; 1.13 Whereas, natural resource trustees appointed by the United States or the Gulf States have alsoasserted,ormanifestedanintenttoassert, natural resource damages claims against BPXP and other BP Entities with respect to the Deepwater Horizon Incident; 1.14 Whereas, this Settlement Agreement is being entered into concurrently with a Consent Decree being entered in MDL 2179, and such Consent Decree fully and finally resolves any and all natural resource damages claims of the United States, the Gulf States, and their respective natural resource trustees, any and all Clean Water Act penalty claims, and certain other claims of the United States and the Gulf States; 1.15 Whereas, it is the intention of the Parties, by this Settlement Agreement, to fully and finally settle, satisfy, and resolve any and all claims (other than those natural resource damages claims, Clean Water Act claims, and other claims being separately settled and resolved by the Consent Decree) between the Gulf States, on the one hand, and the BP Entities, on the other, arising from or related to the Deepwater Horizon Incident; 1.16 Whereas, this Settlement Agreement will provide material benefits to all Parties by the fair and complete resolution of such claims in a timely manner without the need for further protracted litigation; 2

116 NOW, THEREFORE, without further adjudication, findings, or admissions of any issue of fact or law in connection with the Deepwater Horizon Incident other than those expressly set forth in this Settlement Agreement, and for good and valuable consideration, the undersigned Parties do hereby agree: II. DEFINITIONS 2.1 Act of Insolvency means any one of the following: the presentation of a winding-up petition in respect of BP p.l.c., the making of an application for an administration order in respect of BP p.l.c., an application to court for an order convening meetings of creditors of BP p.l.c. to consider a scheme of arrangement under the Companies Act 2006 that would materially alter any Gulf State s rights under this Settlement Agreement, the summoning of meetings of the creditors of BP p.l.c. (including any of the Gulf States) to consider a proposal for a company voluntary arrangement or other composition under the Insolvency Act 1986 that would materially alter any Gulf State s rights under this Settlement Agreement, or the appointment of an administrative receiver, administrator or liquidator in respect of BP p.l.c. If in the case of a petition presented or application made by a creditor, contributory or other third party, such petition or application is stayed, dismissed or withdrawn within sixty (60) days of its filing, such petition or application shall not constitute an Act of Insolvency. For the purposes of this Paragraph, the term materially alter means an alteration to any Gulf State s rights under the Settlement Agreement which reduces the amounts owed or payable, or extends the time at which payments are to be made to any Gulf State, or is otherwise materially prejudicial to any Gulf State. 2.2 BP Entities means one or more of the following: BP p.l.c., BPCNA, BPXP, and any parents, subsidiaries, successors, assigns, and all entities on any Group Structure list, which are publicly available and provided by BP p.l.c. to the Registrar of Companies, between 2010 and July 2, 2015, and, for each of the preceding, all of their current, future and former officers, directors, and employees. 2.3 BP p.l.c. means BP p.l.c., a company incorporated in England whose registered office is at 1 St. James s Square, London, SW1Y 4PD, England. 2.4 BPCNA means BP Corporation North America Inc., incorporated in the State of Indiana, with its current principal place of business in Houston, Texas. 2.5 BPXP means BP Exploration & Production Inc., incorporated in the State of Delaware, with its current principal place of business in Houston, Texas. 2.6 Change of Control means change of control of BP p.l.c. in the form of a takeover bid, tender offer or other merger transaction (however effected), that has become unconditional in all respects or otherwise effective, under which a third party or group of parties acting together acquires such number of shares in BP p.l.c. (or an interest in such shares) so as to carry more than 50% of the voting rights. 2.7 Claims means any and all claims or causes of action, whether in law or in equity, known or unknown, direct or indirect, past, present, or future, arising from or related to the Deepwater 3

117 Horizon Incident, including, but not limited to: (1) Economic Claims; (2) any claims that were or could have been asserted by any Gulf State in MDL 2179; and (3) any claims for damages, liens, fines, penalties, costs, or criminal assessments, injunctive relief, or other liabilities or theories of damage that were or could have been asserted by any Gulf State in any civil, criminal, or administrative proceeding, including any and all claims for attorneys fees, costs, and expenses. For the avoidance of doubt, Claims includes any and all such claims or causes of action regardless of legal or equitable theory or nature under which they are based or advanced, including (but not limited to) legal and/or equitable theories under any federal, state, administrative, foreign, or international law, and including (without limitation) statutory law, codal law, regulation, common law, or equity, and whether based in maritime law, strict liability, negligence, gross negligence, punitive or exemplary damages, nuisance, trespass, and all other legal and equitable theories, whether existing now or arising in the future, arising from or in any way related to the Deepwater Horizon Incident. Notwithstanding the foregoing definition, solely the following claims or causes of action arising from or related to the Deepwater Horizon Incident shall not constitute Claims hereunder: (a) claims of the Gulf States for natural resource damages and Clean Water Act penalties to the extent that such claims are to be fully and finally settled and resolved pursuant to the Consent Decree; (b) claims brought by the Gulf States against the Transocean Entities and/or Halliburton Entities for punitive or exemplary damages arising from or related to the Deepwater Horizon Incident; (c) claims arising from any discharge or release of oil after the Effective Date of the Settlement Agreement from any one of the eight aliquots within Block 252, Mississippi Canyon, OCS Official Protraction Diagram, NH three of which are owned or operated by BPXP or any BP Entity as of July 2, 2015; or (d) claims arising from the breach of, or seeking to enforce, this Settlement Agreement. 2.8 Consent Decree means a consent decree by and between the United States, the States of Alabama, Florida, Louisiana, Mississippi and Texas, BPXP and other BP Entities, entered in MDL 2179, and fully and finally resolving, inter alia, Clean Water Act penalties, natural resource damages, federal False Claims Act claims, and federal royalty claims arising from the Deepwater Horizon Incident. 2.9 Court means the United States District Court for the Eastern District of Louisiana Deepwater Horizon Incident means events, actions, inactions, and/or omissions leading up to and including the following: (i) all discharges of hydrocarbons or other substances from the Macondo Well, and all discharges from, through, or into the Deepwater Horizon mobile offshore drilling unit (including its appurtenances), occurring on or after April 20, 2010, regardless of any subsequent movement, migration, resuspension, or resurfacing of such hydrocarbons or other substances; (ii) the installation, construction, drilling and/or blowout of the Macondo Well; (iii) the explosion and fire on the Deepwater Horizon; (iv) the sinking and/or loss of the Deepwater Horizon; (v) any and all containment efforts related to the Macondo Well; (vi) construction of relief wells related to the Macondo Well; (vii) any and all cleanup, remediation, removal, response, and/or restoration efforts related to the foregoing, including, but not limited to, the Vessels of Opportunity program, the application of dispersants, and any diversion of fresh water; and (viii) operations of any claims facility related to any of the foregoing Economic Claims means any and all claims or causes of action by any Gulf State arising 4

118 from or related to the Deepwater Horizon Incident for or related to economic loss, property damage, business interruption, breach of contract, loss of royalties, lost tourism revenue, lost taxes, losses arising from or related to Moratoria, losses related to closures of fishing and harvesting of natural resources, costs of public services or goods, operating costs, or any other costs, losses, or damages (other than natural resourcedamagestotheextentsuchdamagesareto be fully and finally settled and resolved pursuant to the Consent Decree), including without limitation, any claim arising out of the Oil Pollution Act, 33 U.S.C. 2702(b)(1) and/or 2702(b)(2)(B) - (F), state or federal common law, maritime law, or any other applicable provision of law Effective Date of the Settlement Agreement means the earliest date upon which all of the following have occurred: (a) the Settlement Agreement has been fully executed by all of the Parties hereto, and (b) the condition set forth in Paragraph 6.1 has been met Gulf State or Gulf States means the States of Alabama, Florida, Louisiana, Mississippi, and Texas together with the Gulf States affiliates when used in the plural, and each of them individually and that respective Gulf State s affiliates when used in the singular. A Gulf State s affiliates shall include that Gulf State s branches, agencies, associations, authorities, boards, bureaus, councils, departments, educational institutions or systems, components, public benefits corporations, or other instrumentalities of any kind, administrators, elected or unelected officials, officers or delegates (other than in their individual capacities), assigns, insurers, attorneys, or other agents of any kind; provided however that a Gulf State s affiliates shall not include Local Governmental Entities Halliburton Entities means Halliburton Company and Halliburton Energy Services Inc Local Governmental Entities means counties, parishes, municipalities, or any other local governmental or local political subdivisions authorized by law to perform local governmental functions Macondo Well means: (a) Macondo Well 1 (including MC-252#1, Well No. 001ST00BP00, MC-252#1 ST1, Well No. 001ST00BP01), Macondo Well 2 (including MC- 252#2, Well No. 003ST00BP00), and Macondo Well 3 (including MC-252#3, Well No. 002ST00BP00) within Block 252, Mississippi Canyon, OCS Official Protraction Diagram, NH existing on or before the date of lodging of the Consent Decree; (b) the Deepwater Horizon and its appurtenances, including the riser from the Deepwater Horizon; (c)acoffer dam used in the course of removal work conducted during the discharge of oil from Block 252 of the Mississippi Canyon that began April 20, 2010; (d) the Macondo Well as defined in the United States Complaint in MDL 2179; and (e) the eight aliquots within Block 252, Mississippi Canyon, OCS Official Protraction Diagram, NH 16-10, three of which are owned or operated by BPXP or any BP Entity as of July 2, MDL 2179 means the proceedings contained within the court proceedings captioned In Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, MDL No (E.D. La.), United States v. BP Exploration & Production Inc., et al., No. 2:10-cv (E.D. La.), including any and all claims or causes of action or theories of loss 5

119 or damage that have been filed within, referred thereto, or otherwise consolidated thereunder Moratoria means any federal or state governmental action or inaction directed at offshore oil or gas industry activity including shallow water and deepwater operations that occurred on or after April 20, 2010, including, but not limited to, the federal moratoria on offshore permitting and drilling activities, effective date May 30, 2010 (NTL No N04), the increased safety measures issues by the U.S. Department of the Interior, effective date June 8, 2010 (NTL No N05), the information requirements issued by the U.S. Department of the Interior, effective date June 18, 2010 (NTL No N06), the federal deepwater drilling suspensions on or about July 12, 2010, and any other new or revised safety rules, regulations, inspections, permitting practices, restrictions or suspensions Party or Parties means any one of the Gulf States or any one of BPXP, BPCNA, and BP p.l.c. when used in the singular and all of the Gulf States together with BPXP, BPCNA, and BP p.l.c. when used in the plural Settlement Agreement means this Agreement, all Attachments, and the Primary and Secondary Guaranty Agreements referenced herein Transocean Entities means Transocean Deepwater Inc., Transocean Holdings LLC, Transocean Inc., Transocean Ltd., Transocean Offshore Deepwater Drilling Inc., and Triton Asset Leasing GmbH, together with their parents, subsidiaries, affiliates, officers, directors, employees, and agents. III. SETTLEMENT PAYMENTS 3.1 Settlement Payment and Schedule. In consideration of the full and complete settlement and release of Claims, BPXP shall pay a total of four billion nine hundred million dollars ($4,900,000,000.00) to the States of Alabama, Florida, Louisiana, Mississippi, and Texas on behalf of the Gulf States in accordance with the payment schedule and provisions set forth in Attachment Payment Instructions. Payments made to each state pursuant to the foregoing Paragraph 3.1 shall be directed according to the wiring instructions set forth in Attachment 2. Any of the States of Alabama, Florida, Louisiana, Mississippi, or Texas may modify its respective payment instructions set forth in Attachment 2 provided that any such modification is set forth in writing and such written instructions are received by BPXP, BPCNA, BP p.l.c., and the Court no later than sixty (60) days before any such payment is due. IV. SATISFACTION, RELEASES, AND COVENANTS NOT TO SUE 4.1 Satisfaction and Settlement. This Settlement Agreement fully and finally satisfies, resolves, and settles any and all Claims between the Gulf States, on the one hand, and the BP Entities, on the other. 6

120 4.2 Release and Covenant Not to Sue BP Entities. The Gulf States each hereby fully, finally, and forever release and waive any and all Claims against the BP Entities and further covenant not to sue the BP Entities for any and all Claims. 4.3 Release and Covenant Not to Sue Third Parties. The Gulf States each hereby fully, finally, and forever release and waive any and all Claims, and further covenant not to assert any and all Claims, against any party who is or could be responsible or liable in any way for the Deepwater Horizon Incident, including those parties set forth in Attachment 3 and any parties related to those parties set forth in Attachment 3, except that, for the avoidance of doubt, this release and covenant not to sue shall not extend to the Gulf States claims for punitive or exemplary damages against the Transocean Entities or Halliburton Entities arising from or related to the Deepwater Horizon Incident. 4.4 Dismissal with Prejudice. No later than thirty (30) days after the Effective Date, the Gulf States shall dismiss and/or cause to be dismissed any and all previously filed Claims in MDL 2179 or any other proceedings against the BP Entities or any party covered by the release and covenant not to sue in Paragraph 4.3 (including those listed on Attachment 3) and take all steps as reasonably necessary, including the filing of appropriate dismissal pleadings, to implement the dismissal of such Claims. For the avoidance of doubt, such dismissal shall not extend to the Gulf States claims for punitive or exemplary damages against the Transocean Entities or Halliburton Entities arising from or related to the Deepwater Horizon Incident. 4.5 Effect on Local Governmental Entities. Those claims filed by the Gulf States in MDL 2179 have been filed solely on behalf of, and for the benefit of, each respective Gulf State and did not assert or preserve any claims on behalf of, or for the benefit of, any Local Governmental Entity; and the releases in Paragraphs 4.2 and 4.3 do not release any claims for any Local Governmental Entity. 4.6 Subrogation. As this Settlement Agreement is fully and completely settling and resolving the Claims, BPXP is hereby subrogated to any and all rights that any Gulf State may have for those Claims against any person who is a beneficiary of the releases and covenants not to sue set forth in Paragraph Attorneys Fees and Expenses. Each Party shall bear its own attorneys fees and associated costs and expenses, except as otherwise ordered by the Court. V. FINANCIAL ASSURANCE 5.1 BPCNA as Primary Guarantor. Prior to the date of lodging of the Consent Decree, BPCNA shall and each beneficiary deliver an executed guaranty in the form of the Primary Guaranty in Attachment 4 of this Settlement Agreement, which guarantees the payments due to each of the States of Alabama, Florida, Louisiana, Mississippi, and Texas from BPXP pursuant to Paragraph 3.1 and Attachment 1 as primary guarantor in the event that BPXP defaults on such payments as set forth in Paragraph 5.3 below. 5.2 BP p.l.c. as Secondary Guarantor. Prior to the date of lodging of the Consent Decree, 7

121 BP p.l.c. and each beneficiary shall deliver an executed guaranty in the form of the Secondary Guaranty in Attachment 5 of this Settlement Agreement, which guarantees the payments due to each of the States of Alabama, Florida, Louisiana, Mississippi, and Texas from BPXP pursuant to Paragraph 3.1 and Attachment 1 as secondary guarantor in the event that both (a) BPXP defaults on such payments as set forth in Paragraph 5.3 below and (b) BPCNA defaults on its obligation to serve as primary guarantor of such payments as set forth in Paragraph 5.4 below. 5.3 BPXP Default. For the purposes of Paragraphs 5.1, 5.2, 5.4, and 5.7, BPXP shall be considered in default of a payment to a state required under this Settlement Agreement if any of the following conditions has been met: A. BPXP has failed to make such payment within sixty (60) days after such payment has become due under the Settlement Agreement; B. BPXP has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or C. Any third party has petitioned a court to place BPXP in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief has been entered, and any such filing or petition has not been dismissed within sixty (60) days of such order for relief. 5.4 BPCNA Default as Primary Guarantor. For the purposes of Paragraph 5.2, BPCNA shall be considered in default on its guaranty of a payment to a state required under the Settlement Agreement if BPXP has defaulted on such payment as described in Paragraph 5.3 and any of the following conditions has been met: A. BPCNA has failed to make a payment required under the Primary Guaranty within sixty (60) days after a BPXP default; B. BPCNA has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or C. Any third party has petitioned a court to place BPCNA in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief has been entered, and any such filing or petition has not been dismissed within sixty (60) days of such order for relief. 5.5 Successors and Assigns of Guarantors. A. BPCNA s payment obligations under the Primary Guaranty shall be binding on any legal successor or assign of BPCNA, and a written agreement that such successor or assign shall so remain liable shall be included by BPCNA in the terms of any sale, acquisition, or merger of BPCNA with such successor or assign. Upon demonstration that any such successor or assign has become liable for BPCNA s obligations under the Primary Guaranty and upon written consent of the States of Alabama, Florida, 8

122 Louisiana, Mississippi and Texas, BPCNA s obligations under the Primary Guaranty shall terminate. Any such termination shall be in writing, fully executed by the States of Alabama, Florida, Louisiana, Mississippi, and Texas and BPCNA. B. BP p.l.c. s payment obligations under the Secondary Guaranty shall be binding on any legal successor or assign of BP p.l.c., and a written agreement that such successor or assign shall so remain liable shall be included by BP p.l.c. in the terms of any sale, acquisition, or merger of BP p.l.c. with such successor or assign. Upon demonstration that any such successor or assign has become liable for BP p.l.c. s obligations under the Secondary Guaranty and upon written consent of the States of Alabama, Florida, Louisiana, Mississippi, and Texas, BP p.l.c. s obligations under the Secondary Guaranty shall terminate. Any such termination shall be in writing, fully executed by the States of Alabama, Florida, Louisiana, Mississippi, and Texas and BP p.l.c. 5.6 Alternative Financial Assurances. Upon the request of BPCNA or BP p.l.c. and written approval of any of the States of Alabama, Florida, Louisiana, Mississippi, or Texas, the Primary Guaranty and/or the Secondary Guaranty may be modified and/or replaced with an alternative form of financial assurance such as a letter of credit or trust agreement solely with respect to BPXP s payment obligations to the approving state(s) under this Settlement Agreement. Any such modification or replacement shall be in writing, fully executed by the approving state(s) and the BP Entity as to which such modification or replacement is made, and consented to in writing by the other states, such consent not to be unreasonably withheld. 5.7 Acceleration. A. If there has been a Change of Control, the States of Alabama, Florida, Louisiana, Mississippi, and Texas each may individually elect to accelerate the schedule for its payments required in Section III. In such case, the accelerated payments shall become due and owing one hundred twenty (120) days after service of notice of such election, or at any other time that the relevant Parties may agree upon. B. If there has been an Act of Insolvency, the States of Alabama, Florida, Louisiana, Mississippi, and Texas each may individually elect to accelerate the schedule for its payments required in Section III. In such case, the accelerated payments shall become due and owing immediately upon service of notice of such election, or at any other time that the relevant Parties may agree upon. C. If there has been a Change of Control or Act of Insolvency, then BP p.l.c. shall notify the States of Alabama, Florida, Louisiana, Mississippi, and Texas immediately. VI. CONDITION 6.1 Condition. This Settlement Agreement shall be conditioned upon, and shall not become effective until, the Consent Decree has been entered by the Court. 9

123 VII. NOTICE 7.1 Notice. Any notice given pursuant to this Settlement Agreement shall be provided in writing and addressed to the Parties as set forth below. All notices shall be sent by one or more of the following methods: first class mail, registered or certified mail, or nationally recognized overnight delivery service, and shall be filed with the Court in MDL 2179 to the extent that MDL 2179 has not been terminated. Written notice shall be deemed to have been given to a recipient on the date it is delivered to the recipient at the address set forth below. Any Party may change its designated recipient or address for receiving notice by providing written notice of such change to the other Parties as set forth below. Notice consistent with Paragraph 7.1is considered sufficient notice as to all Parties. A change in the designated recipient or address for receiving notice shall not constitute a modification of this Settlement Agreement for the purposes of Paragraph 8.6 below. Notice to the State of Alabama shall be sent to: Governor of Alabama Attn: BP Litigation State Capitol 600 Dester Avenue Montgomery, AL Attorney General Office of the Attorney General c/o BP Litigation 501 Washington Avenue Montgomery, AL R. Cooper Shattuck Office of Counsel, University of Alabama System 500 University Blvd. East Tuscaloosa, AL Notice to the State of Florida shall be sent to: Office of the Attorney General Attn: Russell Kent, Special Counsel PL-01, The Capitol Tallahassee, FL Phone: (850) russell.kent@myfloridalegal.com Or to the following street address: 10

124 Office of the Attorney General 107 W. Gaines St. Tallahassee, FL Notice to the State of Louisiana shall be sent to: Office of Attorney General State of Louisiana Attn: Megan K. Terrell Assistant Attorney General Section Chief - Environmental State of Louisiana P.O. Box Baton Rouge, LA Phone: (225) Or to the following street address: 1885 N. Third Street 6 th Floor Baton Rouge, LA Notice to the State of Mississippi shall be sent to: The Honorable Jim Hood Attorney General State of Mississippi Post Office Box 220 Jackson, MS Notice to the State of Texas shall be sent to: Chief, Environmental Protection Division (Attn: Thomas Edwards, AAG) Office of the Attorney General (MC-066) P.O. Box Austin, TX Or to the following street address: Wm.P.ClementsStateOfficeBuilding 300 W. 15 th St., Floor 10 Austin, TX Phone: (512) Thomas.Edwards@TexasAttorneyGeneral.gov 11

125 Notice to BPXP shall be sent to: BP Exploration & Production Inc. 501 Westlake Park Boulevard Houston, Texas Attention: U.S. Company Secretary with copies to each of the following: BP Exploration & Production Inc. 501 Westlake Park Boulevard Houston, Texas Attention: Gulf of Mexico, Regional President BP America 501 Westlake Park Boulevard Houston, Texas Attention: U.S. General Counsel Notice to BPCNA shall be sent to: BP Corporation North America Inc. 501 Westlake Park Boulevard Houston, Texas Attention: Company Secretary with copies to each of the following: BP Corporation North America Inc. 501 Westlake Park Boulevard Houston, Texas Attention: President BP America 501 Westlake Park Boulevard Houston, Texas Attention: U.S. General Counsel Notice to BP p.l.c. shall be sent to: BP p.l.c. 1 St James s Square London, SW1Y 4PD United Kingdom Attention: Company Secretary 12

126 with copies to each of the following: BP p.l.c. 1 St James s Square, London, SW1Y 4PD United Kingdom Attention: Group General Counsel BP America 501 Westlake Park Boulevard Houston, Texas Attention: U.S. General Counsel 8.1 Successors and Assigns. VIII. MISCELLANEOUS TERMS A. Any legal successor or assign of BPXP shall remain liable for the payment and other performance obligations of BPXP hereunder, and an agreement to so remain liable shall be included in the terms of any such sale, acquisition, or merger of BPXP. In the event of the sale, assignment, or transfer of some, but not all, of BPXP s assets to an unaffiliated third party pursuant to an arm s length transaction, such third party shall not be liable for BPXP s obligations under this Settlement Agreement. B. Except as provided in Paragraph 8.3, no portion of this Settlement Agreement shall provide any rights to, or be enforceable by, any person or entity other than a Gulf State and BPXP,BPCNA,andBPp.l.c.,andnoGulfStatemayassignorotherwiseconveyanyrightto enforce any provision of this Settlement Agreement. Without limiting the foregoing, each Gulf State, and any permitted assignee of such Gulf State, agrees that any assignment of such Gulf State s rights under Section III shall be with recourse to such Gulf State only and without recourse to any BP Entity. 8.2 Retention of Jurisdiction. The Court (and any appellate courts thereof) will retain exclusive jurisdiction over this Settlement Agreement for the purposes of enforcement of the Settlement Agreement and any dispute(s) arising thereunder. Any and all disputes, cases, or controversies concerning this Settlement Agreement, including, without limitation, disputes concerning the interpretation or enforceability of this Settlement Agreement, shall be filed in the Court and shall be accompanied by a legal request made on behalf of the complaining party (including any of the BP Entities or the Gulf States or any third party beneficiary) for such dispute to be made part of MDL 2179 if MDL 2179 has not been terminated. No action(s) to enforce this Settlement Agreement or regarding any dispute(s) arising thereunder shall be filed in any state court. The Parties agree not to contest federal jurisdiction in or consolidation with MDL 2179, or to contest jurisdiction or venue of the Court if MDL 2179 has been terminated by the time any dispute concerning this Settlement Agreement is filed. In all other respects and purposes unrelated to this Settlement Agreement or disputes concerning the interpretation or enforceability of this Settlement Agreement, the BP Entities specifically reserve any and all defenses to jurisdiction and venue of the Court, and the Gulf States 13

127 agree that this Paragraph 8.2 does not constitute a waiver of such jurisdictional defenses, consent to jurisdiction, or an act supporting or sufficient to establish jurisdiction over the BP Entities for any matter besides disputes, cases, or controversies concerning this Settlement Agreement. 8.3 Third Party Beneficiaries. A. Those third parties to whom the releases, covenants not to sue, and dismissals in Section IV of this Settlement Agreement extend constitute third party beneficiaries of this Settlement Agreement who may enforce such releases, covenants not to sue, and dismissals with respect to Claims asserted by any Gulf States against such third parties. B. As set forth in Paragraphs 5.5 and 8.1.A, this Settlement Agreement shall also be binding on permitted successors and assigns of the applicable Parties and shall inure to the benefit of such successors and assigns. C. Except as set forth in Paragraphs 8.3.A and 8.3.B above, this Settlement Agreement shall not inure to the benefit of any third party, does not create any rights on behalf of any third party, and is not enforceable by any third party. 8.4 Final Agreement. This Settlement Agreement constitutes the final, complete, and exclusive agreement and understanding between the BP Entities and the Gulf States with respect to the matters covered by this Settlement Agreement and supersedes any and all other agreements, written or oral, including the July 2, 2015 Agreement in Principle, between the BP Entities, on the one hand, and the Gulf States, on the other, with respect to the matters covered by this Settlement Agreement. 8.5 Effect of Further Proceedings or Appeals. This Settlement Agreement shall remain effective regardless of any appeals or court decisions relating in any way to the liability of those parties, persons, or entities that have been released or to whom the covenants not to sue run pursuant to Section IV. 8.6 Modification. This Settlement Agreement may only be modified by express written consent of the States of Alabama, Florida, Louisiana, Mississippi, and Texas and BPXP, BPCNA, and BP p.l.c., duly executed by their authorized representatives, except that: A. Any one of the States of Alabama, Florida, Louisiana, Mississippi, or Texas (a Modifying State as used in this section) and BPXP may agree to modify the payment schedule with respect to payments to be made hereunder from BPXP to that Modifying State provided that such modification to the payment schedule is set forth in writing and duly executed by the authorized representatives of the Modifying State and BPXP, and consented to in writing by the other states, such consent not to be unreasonably withheld; and B. A Modifying State and BPCNA or BP p.l.c., as the case may be, may modify the financial assurances as set forth in Section V in accordance with the provisions of Paragraph

128 Written notice of any modification to this Settlement Agreement shall be provided to all Parties hereto in the manner set forth in Paragraph Construction. Questions regarding the interpretation of this Settlement Agreement shall not be construed or resolved against any Party on the ground that this Settlement Agreement has been drafted by that Party. This Settlement Agreement is the result of review, negotiation, and compromise by each Party. 8.8 No Admissions. This Settlement Agreement is made without, and shall not constitute, an admission of any fact, law, liability, or wrongdoing by any BP Entity and is made purely by way of compromise and settlement. 8.9 Duty to Cooperate. The Parties shall cooperate, in good faith, to execute any documents, agreements, court filings, or other instruments required by the Settlement Agreement, including any dismissals of Claims, consent orders of the Court, final guaranties, payment instructions or acknowledgments, or any other such documents or modifications thereto Effect of Failure to Execute. If any of the States of Alabama, Florida, Louisiana, Mississippi or Texas does not execute this Settlement Agreement, this Settlement Agreement shall become null and void as to all other Parties Signatories. A. This Settlement Agreement may be executed in one or more counterparts, each of which will be deemed an original copy of the Agreement and all of which, when taken together, will constitute one and the same Settlement Agreement. B. Each one of the States of Alabama, Florida, Louisiana, Mississippi, and Texas hereby represents and warrants that (i) such Gulf State s undersigned representative has authority to execute this Settlement Agreement on behalf of the respective Gulf State for whom the representative is signing and (ii) it has not sold or otherwise transferred or assigned any of the Claims or any interest in such Claims. C. Each undersigned BP Entity hereby represents and warrants that its undersigned representative has authority to execute this Settlement Agreement on behalf of the BP Entity for whom the representative is signing. D. BPCNA and BP p.l.c. are signing this Settlement Agreement, and shall be considered Parties to this Settlement Agreement, only for the purpose of binding BP p.l.c. and BPCNA to their respective obligations as guarantors pursuant to Section V of this Settlement Agreement Timing. In computing any period of time under this Settlement Agreement, the Primary Guaranty, or the Secondary Guaranty, where the last day would fall on a Saturday, Sunday, or federal holiday, the period shall run until 5 p.m. Central Time of the next business day. 15

129

130 ~'ort\ State of Florida, BY.IVk--~~ Attorney Gen~State of Florida Date: 9 ;,) lis" I I By: ~ Governor of the State of Florida Date: 9jlr-;(~ f I 17

131 By: --~1+--~~r Bobby Governor of the State of Louisiana By: James D. "Buddy" Caldwell Attorney General for the State of Louisiana Date:

132 For the State of Louisiana By: ~~~ Bobby lindal Governor of the State of Louisiana Date: -:T-~:;;:=~;;;:==:-- 18

133 By: ~~~~~~~~~~~ Attorney Ge Date: q--+i_l Y--,-+,!2=----=o ---,- 1 I ' =5

134 For the State of Texas By: e State of Texas By: Attorney General for the State of Texas Approved: TEXAS GENERAL LAND OFFICE By: Anne Idsal, Chief Clerk Texas General Land Office TEXAS COMMISSION ON ENVIRONMENTAL QUALITY Richard Hyde, Executive Director Texas Commission on Environmental Quality TEXAS PARKS AND WILDLIFE DEPARTMENT By: Carter Smith, Executive Director Texas Parks and Wildlife Department 21

135 For the State of Texas Governor of the State of Texas By: /(._ 2*-- Attomey General of the State of Texas Date: Cf/ IS/ 1 S I I Approved: TEXAS GENERAL LAND OFFICE By: Anne Idsal, Chief Clerk Texas General Land Office TEXAS COMMISSION ON ENVIRONMENTAL QUALITY By: Richard Hyde, Executive Director Texas Commission on Environmental Quality TEXAS PARKS AND WILDLIFE DEPARTMENT By: Carter Smith, Executive Director Texas Parks and Wildlife Department 21

136 For the State of Texas By: Governor of the State of Texas Date: By: Attorney General for the State of Texas Approved: By: Anne Idsal, Chief Clerk Texas General Land Office TEXAS COMMISSION ON ENVIRONMENTAL QUALITY By: Richard Hyde, Executive Director Texas Commission on Environmental Quality TEXAS PARKS AND WILDLIFE DEPARTMENT By: Carter Smith, Executive Director Texas Parks and Wildlife Department 21

137 For the State of Texas By: ~~~~~~~~~~~~~~ Governor of the State of Texas By: ~~~~~~~~~~~~ Attorney General for the State of Texas Approved: TEXAS GENERAL LAND OFFICE By: Anne Idsal, Chief Clerk Texas General Land Office TEXAS COMMISSION ON ENVIRONMENTAL QUALITY By: Zid~,E~tor Texas Commission on Environmental Quality TEXAS PARKS AND WILDLIFE DEPARTMENT By: Carter Smith, Executive Director Texas Parks and Wildlife Depaiiment 21

138 For the State of Texas By: ~~~~~~~~~~~~~~ Governor of the State of Texas By: ~~~~~~~~~~~~~~ Attorney General for the State of Texas Approved: TEXAS GENERAL LAND OFFICE By: Anne Idsal, Chief Clerk Texas General Land Office TEXAS COMMISSION ON ENVIRONMENTAL QUALITY By: Richard Hyde, Executive Director Texas Commission on Environmental Quality TEXAS PARKS AND WILDLIFE DEPARTMENT By: arter mith, Executive Director Texas Parks and Wildlife Department 21

139 Gulf States Economic Claims Settlement Agreement For BP Exploration & Production Inc, &1y By: Michael Daneker ARNOLD & PORTER LLP 60 I Massachusetts Avenue NW Washington, DC 2000 I Date: q - L~ - "2.0 IS For BP Corpol'ation North America Inc. By: Edc L. Nitcher Assistant General Counsel, BPCNA 501 Westlake Park Blvd Houston, Texas Date: For BP p.l.c.., 1700 New York Avenue NW Washington, DC _,<l f _ (1 0 )5 L- Date: / ~ v< 21

140 Assumed Year*** Payments to Alabama ATTACHMENT 1 PAYMENT SCHEDULE FOR STATE CLAIMS PAYMENT Payments to Florida Payments to Louisiana Payments to Mississippi Payments to Texas Total Annual Payments by BPXP 2016 $100,000,000**** $400,000,000 $200,000,000 $150,000,000 $50,000,000 $900,000, $50,000,000 $50,000, $50,000,000 $50,000, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,333 $106,666,666 $53,333,333 $40,000,000 $6,666,666 $259,999, $53,333,338 $106,666,676 $53,333,338 $40,000,000 $6,666,676 $260,000,028 Totals $1,000,000,000 $2,000,000,000 $1,000,000,000 $750,000,000 $150,000,000 $4,900,000,000 ***The above schedule assumes the Settlement Agreement will have an Effective Date in The 2016 payments are due within ninety (90) days of the Effective Date. Each annual payment thereafter is due on the anniversary of the Effective Date. ****Alabama s payment of $100,000,000 in (assumed year) 2016 shall be split equally between the two state accounts listed in Attachment 2. 22

141 ATTACHMENT 2 PAYMENT INSTRUCTIONS FROM EACH GULF STATE Alabama Payment Instructions All payments under this Settlement Agreement to be made to the State of Alabama shall be made by wire transfer using the following instructions: A. Except as provided in (B), wire all payments to the State of Alabama as follows: Financial Institution: Wells Fargo ABA Routing Number: Account to Credit: B. Wire $50,000,000 of the State s first annual payment (assumed year 2016) to the State of Alabama, Department of Conservation and Natural Resources as follows: Financial Institution: Compass Bank ABA Routing Number: Account to Credit: At the time of each payment, the payor shall send a copy of the wire transfer authorization form and transaction record in accordance with the notice requirements of Paragraph

142 Florida Payment Instructions All payments under this Settlement Agreement to the State of Florida shall be made by wire transfer using the following instructions: Receiving Bank: Bank of America, N.A. Routing Number: Account Number: Beneficiary: Department of Financial Services Account Title: State of Florida, Department of Financial Services Address: 315 South Calhoun Street Tallahassee FL At the time of each payment, the payor shall send a copy of the wire transfer authorization form and transaction record in accordance with the notice requirements of Paragraph

143 Louisiana Payment Instructions All payments under this Settlement Agreement to the State of Louisiana shall be made by wire transfer using the following instructions: Bank Name: JPMorgan Chase Bank, N.A. Account Name: State of Louisiana Treasury Account #: ABA Routing #: The sender shall notify Office of Finance and Support Services of the amount of payment and the expected wire date. A deposit ticket must be sent to State Treasury in advance to secure the funds being sent. 25

144 Mississippi Payment Instructions All payments under this Settlement Agreement to be made to the State of Mississippi shall be made by wire transfer using the following instructions: Beneficiary Address: Walter Sillers Building 550 High Street, Jackson, MS P.O. Box 220 Jackson, MS Beneficiary Bank Account Number: Beneficiary Bank: Trustmark National Bank ABA Routing Number: Bank Address: P.O. Box 291 Jackson, MS

145 Texas Payment Instructions All payments under this Settlement Agreement to be made to the State of Texas shall be made by wire transfer to the Comptroller of Public Accounts, State of Texas, for the Attorney General s Suspense Account using the following instructions: Financial Institution: TX COMP AUSTIN Routing Number: Account Name: Comptroller of Public Accounts, Treasury Operations Account Number to Credit: Reference: AG No (BP Gulf Oil Spill) Attention: Office of the Attorney General, Chief, EPD Div. ( ) Contact: Kristy Lerma, Financial Reporting ( ) At the time of each payment, the payor shall likewise send a copy of the wire transfer authorization form and transaction record, together with a transmittal letter referencing AG No to the State of Texas in the manner specified in the notice requirements of Paragraph

146 ATTACHMENT 3 LIST OF PARTIES SUBJECT TO COVENANT NOT TO SUE Airborne Support Inc. Airborne Support International Inc. Alaska Clean Seas, Inc. Anadarko Exploration & Production LP Anadarko E&P Company LP Anadarko Petroleum Corporation Art Catering, Inc. Cameron Corporation Cameron International Corporation Cameron International Corporation f/k/a Cooper Cameron Corporation Cameron International Corporation d/b/a/ Cameron Systems Corporation Crowder Gulf Disaster Recovery Court Supervised Settlement Program in MDL 2179 and its Administrators, Employees, and Agents Deepwater Horizon Oil Spill Trust, Trustees and Employees Det Norske Veritas (DNV) Dril-Quip, Inc. DRC Emergency Services, Inc. DRC Marine, LLC Dynamic Aviation Kenneth Feinberg Feinberg Rozen LLP Fluor Corporation Gulf Coast Claims Facility, Administrators, Employees, and Agents Halliburton Company Halliburton Energy Services, Inc. International Air Response LLOG Exploration Offshore, L.L.C. LLOG Bluewater, L.L.C. LLOG Bluewater Holdings, L.L.C. Lloyd s Syndicate 1036 and other Lloyd s Syndicates named as defendants in MDL 2179 Lynden Companies Marine Spill Response Corporation Mitsui & Co., Ltd. Mitsui & Co. (U.S.A.), Inc. Mitsui Oil Exploration Co., Ltd. Ministry of Economy, Trade and Industry of the Government of Japan M-I Drilling Fluids L.L.C. M-I, LLC a/k/a M-I Swaco MOEX Offshore 2007 LLC MOEX USA Corporation 28

147 Moran Environmental Recovery Nalco Company NALCO Holding Company National Response Corporation O Brien s Response Management Oceaneering International, Inc. Oil Spill Liability Trust Fund Parsons Commercial Technology Group, Inc. QBE Marine & Energy Syndicate 1036 QBE Underwriting Ltd. Schlumberger, Ltd. SEACOR Marine SEACOR Holdings, Inc. SEACOR Offshore LLC Sperry Drilling Services f/k/a Sperry Sun Drilling Services The Response Group, LLC Tidewater Inc. Tidewater Marine, LLC Transocean Deepwater Inc. Transocean Holdings LLC Transocean Inc. Transocean Ltd. Transocean Offshore Deepwater Drilling Inc. Triton Asset Leasing GmbH Weatherford International, Inc. Weatherford U.S. L.P. Witt O Brien s Worley Catastrophe Services LLC Worley Companies Inc. 29

148 ATTACHMENT 4 PRIMARY GUARANTY BY BP CORPORATION NORTH AMERICA INC. IN FAVOR OF THE STATE OF [INSERT ALABAMA, FLORIDA, LOUISIANA, MISSISSIPPI OR TEXAS] RELATING TO THE SETTLEMENT AGREEMENT BETWEEN THE GULF STATES AND THE BP ENTITIES WITH RESPECT TO ECONOMIC AND OTHER CLAIMS ARISING FROM THE DEEPWATER HORIZON INCIDENT 30

149 1. Guaranty 2. Unconditional Guaranty 3. Waiver 4. Subrogation 5. Notices 6. A Valid Demand, When Required, and Payment 7. No Waiver; Remedies 8. Term; Termination 9. Assignment; Successors and Assigns 10. No Third Party Beneficiaries 11. Amendments 12. Captions 13. Representations and Warranties 14. Severability 15. Jurisdiction 16. Governing Law 31

150 PRIMARY GUARANTY This Primary Guaranty (the Guaranty ) is made the day of, 2015 and effective as of the Effective Date (as defined in the Settlement Agreement) by BP Corporation North America Inc., an Indiana corporation, ( Primary Guarantor ), in favor of the State of [Insert one of Alabama, Florida, Louisiana, Mississippi, or Texas] (the Beneficiary ). WHEREAS, the Beneficiary, as well as the States of [Insert States], on the one hand, and BP Exploration & Production Inc. ("BPXP"), the Primary Guarantor, and BP p.l.c., on the other hand, are parties to that Settlement Agreement between the Gulf States and the BP Entities with respect claims arising from the Deepwater Horizon Incident dated, 2015 (the Settlement Agreement ) giving rise to those payment obligations due from BPXP to the Beneficiary as more fully described and set forth in Paragraph 3.1 of and in Attachment 1 to the Settlement Agreement (the Guaranteed Obligations ); WHEREAS, the Primary Guarantor is an indirect parent of BPXP; and WHEREAS, for the benefit of the Beneficiary, the Primary Guarantor has agreed to provide this Guaranty pursuant to Section V (Financial Assurance)of the Settlement Agreement. NOW, THEREFORE, in consideration of good and valuable consideration to the Primary Guarantor, including the Settlement Agreement, the adequacy, receipt and sufficiency of which are hereby acknowledged, the Primary Guarantor hereby agrees as follows: 1. GUARANTY. (a) (b) The Primary Guarantor hereby irrevocably and unconditionally guarantees that if (i) BPXP has failed to make a payment required under the Settlement Agreement within sixty (60) days after such payment has become due under the Settlement Agreement; or (ii) BPXP has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or (iii) any third-party has petitioned a court to place BPXP in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief is entered, and any such filing or petition is not dismissed within sixty (60) days of entry of such order for relief (any of (i), (ii) or (iii) immediately above, a BPXP Default ), the Primary Guarantor shall within sixty (60) days pay to the Beneficiary the unpaid Guaranteed Obligations then due and payable by BPXP to the Beneficiary in accordance with the payment terms of the Settlement Agreement. The Primary Guarantor shall reimburse the Beneficiary for all sums paid to the Beneficiary by BPXP with respect to such Guaranteed Obligations which the Beneficiary is subsequently required to return to BPXP or a representative of BPXP's creditors as a result of BPXP's bankruptcy, insolvency, liquidation, or similar proceeding. 32

151 (c) (d) In respect of subsection 1(b), this Guaranty shall be a continuing guaranty of all of theguaranteedobligationsandshallapplytoandsecureanyultimatebalancedueor remaining unpaid to the Beneficiary; and this Guaranty shall not be considered as wholly or partially satisfied by the payment or liquidation at any time of any sum of money for the time being due or remaining unpaid to the Beneficiary. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Beneficiary on the insolvency, bankruptcy or reorganization of BPXP or the Primary Guarantor or otherwise, all as though such payment had not been made. The Primary Guarantor's obligations and liability under this Guaranty shall be limited to payment obligations only. 2. UNCONDITIONAL GUARANTY. Save due performance by BPXP or the Primary Guarantor, the liability of Primary Guarantor under this Guaranty shall not be limited, lessened or discharged by any of the following: (a) (b) (c) any incapacity or disability or lack or limitation of status or power of BPXP or that BPXP may not be a legal entity; the bankruptcy or insolvency of BPXP; or any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of the Guaranteed Obligations or the rights of the Beneficiary with respect thereto; The obligations of the Primary Guarantor hereunder are several and not joint with BPXP or any other person, and are primary obligations for which the Primary Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guaranty, except as expressly contained herein or as set forth in the Settlement Agreement. It shall not be necessary for the Beneficiary, in order to enforce payment by the Primary Guarantor under this Guaranty, to exhaust any of its remedies or recourse against BPXP, any other guarantor, or any other person liable for the payment, and the Primary Guarantor s obligations hereunder shall apply regardless of whether recovery of all such Guaranteed Obligations may be discharged or uncollectible in any bankruptcy, insolvency or other proceeding, or otherwise unenforceable. 3. WAIVER. Except as set forth in the Settlement Agreement or this Guaranty, the Primary Guarantor hereby waives: (a) (b) notice of acceptance of this Guaranty, notice of the creation or existence of any of the Guaranteed Obligations, and notice of any action by the Beneficiary in reliance hereon or in connection herewith; presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest, or any other notice of any other kind with respect to the Guaranteed Obligations; 33

152 (c) (d) any requirement that suit be brought against, or any other action by the Beneficiary be taken against, or any notice of default or other notice to be given to, or any demand be made on BPXP or any other person, or that any other action be taken or not taken as a condition to the Primary Guarantor's liability for the Guaranteed Obligations under this Guaranty or as a condition to the enforcement of this Guaranty against the Primary Guarantor; and any other circumstance which might otherwise constitute a defense, set-off or counterclaim available to, or a legal or equitable discharge of, BPXP in respect of the Guaranteed Obligations or the Primary Guarantor in respect of this Guaranty. 4. SUBROGATION. The Primary Guarantor shall be subrogated to all rights of the Beneficiary against BPXP in respect of any amounts paid by the Primary Guarantor pursuant to the Guaranty, provided that the Primary Guarantor waives any rights it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise (including, without limitation, any statutory rights of subrogation under Section 509 of the Bankruptcy Code, 11 U.S.C. 509, or otherwise), reimbursement, exoneration, contribution, indemnification, or any right to participate in any claim or remedy of the Beneficiary against BPXP or any collateral which the Beneficiary now has or acquires, until all of the Guaranteed Obligations due the Beneficiary shall have been irrevocably and indefeasibly paid to the Beneficiary in full. If (a) the Primary Guarantor shall perform and shall make payment to the Beneficiary of all or any part of the Guaranteed Obligations due such Beneficiary, and (b) all such Guaranteed Obligations due the Beneficiary shall have been indefeasibly paid in full, the Beneficiary shall, at the Primary Guarantor's request, execute and deliver to the Primary Guarantor appropriate documents necessary to evidence the transfer by subrogation to the Primary Guarantor of any interest in such Guaranteed Obligations resulting from such payment of the Primary Guarantor. 5. NOTICES. Notice will be provided in accordance with the terms of Section VII (Notice) of the Settlement Agreement. 6. A VALID DEMAND, WHEN REQUIRED, AND PAYMENT. (a) With respect to any payments required pursuant to Paragraph 5.7 of the Settlement Agreement, the Primary Guarantor is only liable to pay under this Guaranty in accordance with Section 1 hereof if the Primary Guarantor receives from Beneficiary a demand in writing that (i) references this Guaranty, the Guaranteed Obligations due but unpaid to the Beneficiary, and the existence and continuance of a BPXP Default, (ii) is signed by a duly authorized representative of the Beneficiary and (iii) is delivered to the Primary Guarantor pursuant to Section 5 hereof. The Primary Guarantor shall pay, or cause to be paid, Guaranteed Obligations for which a demand is required within sixty (60) days of receipt of such demand, unless, within sixty (60) days, the BPXP Default giving rise to such demand has been paid in full or otherwise remedied by agreement of the Beneficiary and BPXP. 34

153 With respect to all other payments required in the Settlement Agreement, no notice, presentment, or demand shall be required under this Guaranty. The Primary Guarantor shall pay, or cause to be paid, such Guaranteed Obligations within sixty (60) days of the BPXP Default unless the BPXP Default has been paid in full or otherwise remedied by agreement of the Beneficiary and BPXP. 7. NO WAIVER; REMEDIES. No failure on the part of the Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 8. TERM; TERMINATION. This Guaranty shall not take effect until the Effective Date (as defined in the Settlement Agreement) of the Settlement Agreement. This Guaranty shall be and continue to be in full force and effect from the Effective Date until (the earliest of) (i) the date the Guarantied Obligations to the Beneficiary under the Settlement Agreement have been fully and indefeasibly paid; (ii) the date that this Guaranty has been replaced by an alternative financial assurance instrument as provided for in Paragraph 5.6 of the Settlement Agreement; or (iii) the date the Settlement Agreement has been terminated or is held invalid or unenforceable by a court. This Guaranty shall terminate in full on the earliest date upon which any of conditions (i), (ii), or (iii) in the foregoing sentence has been satisfied. 9. ASSIGNMENT; SUCCESSORS AND ASSIGNS. (a) (b) The Primary Guarantor s payment obligations under this Guaranty shall be binding on any legal successor or assign of the Primary Guarantor in accordance with the requirements of Paragraph 5.5 of the Settlement Agreement. No portion of this Guaranty shall provide any rights to, or be enforceable by, any person or entity other than the Beneficiary and the Primary Guarantor, and the Beneficiary may not assign or otherwise convey any right to enforce any provision of this Guaranty. Without limiting the foregoing, any assignment of the Beneficiary s rights of payment under the Settlement Agreement shall be with recourse to the Beneficiary only and without recourse to the Primary Guarantor. 10. NO THIRD PARTY BENEFICIARIES. This Guaranty is for the exclusive benefit and convenience of the Primary Guarantor and the Beneficiary. Nothing contained herein shall be construed as granting, vesting, creating, or conferring any right of action or any other right or benefit upon any other third party. 11. AMENDMENTS. No amendment or other modification of the terms of this Guaranty, including without limitation, those related to payment terms, shall be effective unless it is in writing, is signed by Primary Guarantor and the Beneficiary, and states that it is expressly intended to give effect to the applicable amendment or modification hereto. No waiver of any provision of this Guaranty nor consent to any departure by the Primary Guarantor therefrom, including without limitation, those related to payment terms, shall in any event be effective unless such waiver or consent shall refer to this Guaranty, be in writing, and be signed by the Beneficiary. Any such waiver or consent shall be effective only in the specific instance and for 35

154 the specific purpose for which it was given. 12. CAPTIONS. The captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions. 13. REPRESENTATIONS AND WARRANTIES. The Primary Guarantor represents and warrants as follows: (a) (b) (c) (d) the Primary Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Indiana. the Primary Guarantor has full power and authority to execute, deliver, and perform its obligations under this Guaranty, and no limitation on the powers of the Primary Guarantor will be exceeded as a result of entering into this Guaranty; the execution, delivery, and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not contravene the Primary Guarantor's constitutional documents; and this Guaranty constitutes the legal, valid, and binding obligation of the Primary Guarantor, enforceable against it by the Beneficiary in accordance with its terms, subject to applicable law. 14. SEVERABILITY. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. 15. JURISDICTION. The Primary Guarantor and the Beneficiary each hereby irrevocably agree to the exclusive jurisdiction and venue of the United States District Court for the Eastern District of Louisiana in MDL 2179 (the Court ). The United States District Court for the Eastern District of Louisiana (and appellate courts thereof) are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Guaranty. Further, upon termination of MDL 2179, any legal action or proceedings arising out of or in connection with this Guaranty shall be brought in the Court, and the Primary Guarantor and the Beneficiary irrevocably submit to the exclusive jurisdiction and venue of the Court with respect to this Guaranty. 16. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD OR REFERENCE TO THE CONFLICT OF LAWS PRINCIPLES OF ANY JURISDICTION. 36

155 IN WITNESS WHEREOF, the Primary Guarantor has caused this Guaranty to be duly executed and delivered by its duly authorized officer on this day of, 2015 but this Guaranty shall be effective as of the Effective Date (as defined in the Settlement Agreement). BP CORPORATION NORTH AMERICA INC. By: Name: Title: 37

156 The undersigned acknowledges and agrees to the foregoing Primary Guaranty by BP Corporation North America Inc. in favor of the State of [Beneficiary] : Date: [Name] Governor State of [Beneficiary] 38

157 The undersigned acknowledges and agrees to the foregoing Primary Guaranty by BP Corporation North America Inc. in favor of the State of [Beneficiary]: Date: [Name] Attorney General State of [Beneficiary] 39

158 ATTACHMENT 5 SECONDARY GUARANTY BY BP P.L.C. IN FAVOR OF THE STATE OF [INSERT ONE OF ALABAMA, FLORIDA, LOUISIANA, MISSISSIPPI OR TEXAS] RELATING TO THE SETTLEMENT AGREEMENT BETWEEN THE GULF STATES AND THE BP ENTITIES WITH RESPECT TO ECONOMIC AND OTHER CLAIMS ARISING FROM THE DEEPWATER HORIZON INCIDENT 40

159 1. Definitions and Interpretation 2. Guaranty 3. Limitation on Exercise of Secondary Guarantor s Rights 4. A Valid Demand; When Required Under the Guaranty 5. No Implied Waivers 6. Representations and Warranties 7. Amendment to the Agreement 8. Assignment and Transfer 9. Communications 10. Amendments 11. Third Party Rights 12. Governing Law and Jurisdiction 41

160 SECONDARY GUARANTY This Secondary Guaranty is made the day of, 2015 and is effective as of the Effective Date (as defined in the Settlement Agreement (as defined below)) by BP p.l.c., a company incorporated in England whose registered office is at 1 St. James's Square, London, SW1Y 4PD England ( Secondary Guarantor ), in favor of the State of [Insert one of Alabama, Florida, Louisiana, Mississippi, or Texas] ( Beneficiary ). WHEREAS, the Beneficiary, as well as the States of [Insert States], on the one hand, and BP Exploration & Production Inc. ( BPXP ), a wholly-owned indirect subsidiary of the Secondary Guarantor, BP Corporation North America ( BPCNA ) and the Secondary Guarantor, on the other hand, have entered into a Settlement Agreement between the Gulf States and the BP Entities with respect to economic and other claims arising from the Deepwater Horizon Incident, dated, 2015 (the "Settlement Agreement"); WHEREAS, BPCNA (the "Primary Guarantor"), another wholly-owned indirect subsidiary of the Secondary Guarantor, and indirect parent company of BPXP, has agreed to guarantee for the benefit of the Beneficiary the Guaranteed Obligations to the Beneficiary (such guarantee, the "Primary Guaranty"); WHEREAS, the Secondary Guarantor has agreed to provide this Guaranty pursuant to Section V (Financial Assurance) of the Settlement Agreement; AND WHEREAS, in consideration of good and valuable consideration to the Secondary Guarantor, including the Settlement Agreement, the adequacy, receipt and sufficiency of which are hereby acknowledged by the Secondary Guarantor; NOW THIS GUARANTY PROVIDES as follows: 1. DEFINITIONS AND INTERPRETATION. 1.1 Definitions. In this Guaranty, except to the extent that the context requires otherwise, terms defined and references construed in the Settlement Agreement shall have the same meanings and construction when used in this Guaranty and, in addition, unless the context otherwise requires, any reference to: (a) "BPCNA Default" means a BPXP Default has occurred and either (i) BPCNA has failed to make a payment required under the Primary Guaranty within sixty (60) Days after a BPXP Default; or (ii) BPCNA has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or (iii) any third party has petitioned a court to place BPCNA in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief is entered, and any such filing 42

161 or petition has not been dismissed within sixty (60) Days of such order for relief. (b) (c) (d) (e) (f) BPXP Default means either (i) BPXP has failed to make a payment required under the Consent Decree within sixty (60) Days after such payment has become due under the Consent Decree; or (ii) BPXP has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or (iii) any third party has petitioned a court to place BPXP in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief is entered, and any such filing or petition has not been dismissed within sixty (60) Days of such order for relief. Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London and New York. Day means a calendar day unless expressly stated to be a Business Day. Guaranteed Obligations means any sum of money of any kind owed by BPXP to the Beneficiary under the Settlement Agreement. Valid Demand means a demand issued by the Beneficiary in accordance with Paragraph Interpretation of certain references. (a) (b) (c) (d) (e) This Guaranty means this Secondary Guaranty, as amended, supplemented, novated, restated, or replaced by any document from time to time and any document which amends, supplements, novates, restates, or replaces this Guaranty. A law includes common or customary law and any constitution, decree, judgment, legislation, order, ordinance, regulation, statute, treaty or other legislative measure, in each case of any jurisdiction whatever. Any obligation of any Person under this Guaranty or any other document referenced herein is a reference to an obligation expressed to be assumed by that Person or imposed on that Person under this Guaranty or that other document, as the case may be. A Person includes any individual, company, corporation, firm, partnership, joint venture, association, organization, trust, state or agency of a state. A BPXP Default and/or a BPCNA Default is continuing ifithas not been remedied. 43

162 2. GUARANTY. 2.1 Guaranty. As consideration for the Beneficiary s entry into the Settlement Agreement and subject to the terms of this Guaranty, including, without limitation, the occurrence and continuance of a BPXP Default and a BPCNA Default, the Secondary Guarantor hereby irrevocably, unconditionally, and absolutely guarantees for the benefit of the Beneficiary, that if (i) there exists and is continuing a BPXP Default, and (ii) there exists and is continuing a BPCNA Default, the Secondary Guarantor shall, within fifteen (15) Business Days of such BPCNA Default, pay to such Beneficiary the unpaid Guaranteed Obligations then due and payable by BPXP to such Beneficiary. The Beneficiary acknowledges that the obligations under this Paragraph 2.1 shall have no effect unless both a BPXP Default and a BPCNA Default shall have occurred and are continuing, and in such instances this Guaranty remains irrevocable, unconditional, and absolute as described in this Guaranty. The Secondary Guarantor's obligations and liability under this Guaranty shall be limited to payment obligations only. 2.2 Secondary Guarantor as Principal Debtor. As between the Secondary Guarantor and the Beneficiary, but without affecting BPXP's obligations, the Secondary Guarantor shall be liable under this Guaranty as if it were the sole principal debtor and not merely a surety. Accordingly, except as otherwise provided in this Guaranty (including, without limitation, Paragraph 2.4), the liability of the Secondary Guarantor under this Guaranty shall not be released, affected or discharged by any act, matter, or omission which (but for this Paragraph) would have released, affected, or discharged the liability of the Secondary Guarantor, including without limitation, any of the following: (a) (b) (c) any incapacity or disability or lack or limitation of status or power of BPXP or BPCNA or that BPXP or BPCNA may not be a legal entity; the bankruptcy or insolvency of BPXP or BPCNA; or any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of the Guaranteed Obligations or the rights of the Beneficiary with respect thereto. 2.3 Secondary Guarantor's Obligations Additional. This Guaranty shall be in addition to and not in substitution for any other rights, remedy, security, or guarantees which the Beneficiary may now or hereafter hold from or on account of the Guaranteed Obligations and subject to a BPXP Default and a BPCNA Default having occurred and being continuing, may be enforced without first having recourse to such other rights, remedy, security, or guarantees. 2.4 Secondary Guarantor's Obligations Continuing. The Secondary Guarantor's obligations under this Guaranty are and remain in full force and effect by way of continuing security, until the earliest of the following: (a) all Guaranteed Obligations payable by BPXP to the Beneficiary under the Settlement Agreement have been paid in full; 44

163 (b) (c) the replacement of this Guaranty by an alternative financial assurance instrument as provided by Paragraph 5.6 of the Settlement Agreement; and the date the Settlement Agreement has been terminated in accordance with its terms, or is held invalid or unenforceable by a court. This Guaranty shall terminate in full on the earliest date upon which any of the conditions (a), (b), or (c) of this Paragraph 2.4 has been satisfied with respect to the Guaranteed Obligations due to the Beneficiary. Unless terminated pursuant to Paragraphs 2.4(a), (b), or (c), the Secondary Guarantor s obligations remain in effect in each case, notwithstanding absorption, amalgamation, or any other changes in the Secondary Guarantor's constitution. 2.5 No Avoidance of Payment. Ifallorpartofanypaymentreceivedorrecovered by the Beneficiary in respect of the Guaranteed Obligations is, on the subsequent bankruptcy, insolvency, corporate reorganization or other similar event of BPXP, avoided or set aside under any laws relating to bankruptcy, insolvency, corporate reorganization or other such similar events, and the amount of such payment is required to be refunded to BPXP or other Persons entitled through BPXP, such payment shall not be considered as discharging or diminishing the liability of the Secondary Guarantor and this Guaranty shall continue to apply as if such amount had at all times remained owing by BPXP. 3. LIMITATION ON EXERCISE OF SECONDARY GUARANTOR'S RIGHTS. Notwithstanding any payment or payments made by the Secondary Guarantor hereunder, so long as any Guaranteed Obligation remains outstanding: (a) (b) the Secondary Guarantor hereby irrevocably waives any right of subrogation to the rights of the Beneficiary against BPXP and any right to be reimbursed or indemnified by BPXP or by any other guarantor of all or any part of the Guaranteed Obligations until such time as all the Guaranteed Obligations due the Beneficiary shall have been irrevocably and indefeasibly paid to the Beneficiary in full; and if, notwithstanding the foregoing, any amount is received or recovered by the Secondary Guarantor as a result of exercising such rights, such amount shall be held by the Secondary Guarantor in trust for the Beneficiary and shall, forthwith upon receipt by the Secondary Guarantor, be paid to the Beneficiary, to be applied against the Guaranteed Obligations due to the Beneficiary in such order as the Beneficiary may determine. 4. A VALID DEMAND; WHEN REQUIRED UNDER THE GUARANTY. 4.1 When Secondary Guarantor's Liability Is Subject to Valid Demand. With respect to any payments required of BPXP pursuant to Paragraph 5.7 of the Settlement Agreement, the Secondary Guarantor is only liable to pay under this Guaranty in accordance with Paragraph 2.1 if it receives from the Beneficiary a demand in writing complying with Paragraph 4.2 ( Valid Demand ). With respect to all other payments 45

164 required of BPXP pursuant to the Settlement Agreement, no demand shall be required under this Guaranty. 4.2 Valid Demand. (a) (b) The Beneficiary may only issue a Valid Demand to the Secondary Guarantor under this Guaranty at least five (5) Business Days after it has sent a written notification to BPXP and the Primary Guarantor of its intention to make a demand under this Guaranty (and which notification may not in any event be sent before a BPXP Default and a BPCNA Default have occurred and are continuing) stating the reasons for making such demand and identifying the Guaranteed Obligations due but unpaid to the Beneficiary in respect of which there has been a BPXP Default and a BPCNA Default. Any Valid Demand made of the Secondary Guarantor under this Guaranty shall be accompanied with a copy of a written notification referred to in Paragraph 4.2(a), dated and sent to BPXP and the Primary Guarantor no less than five (5) Business Days before the date of the demand, and delivered or sent by post or facsimile to the Secondary Guarantor at its address as provided under Section NO IMPLIED WAIVERS. No failure on the part of the Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof, or the exercise of any other right. 6. REPRESENTATIONS AND WARRANTIES. The Secondary Guarantor hereby represents and warrants to the Beneficiary that: (a) (a) (b) (c) the Secondary Guarantor is duly incorporated and is a validly existing company under the laws of its place of incorporation, has the capacity to sue or be sued in its own name, and has power to carry on its business as now being conducted and to own its property and other assets; the Secondary Guarantor has full power and authority to execute, deliver, and perform its obligations under this Guaranty, and no limitation on the powers of the Secondary Guarantor will be exceeded as a result of the Secondary Guarantor entering into this Guaranty; the execution, delivery, and performance by the Secondary Guarantor of this Guaranty and the performance of its obligations under this Guaranty have been duly authorized by all necessary corporate action and do not contravene or conflict with the Secondary Guarantor's memorandum and articles of association; and this Guaranty constitutes the legal, valid, and binding obligation of the 46

165 Secondary Guarantor, enforceable against it by the Beneficiary in accordance with its terms, subject to applicable law. 7. AMENDMENT TO THE SETTLEMENT AGREEMENT. The Secondary Guarantor's obligations under this Guaranty are subject to modification of the terms of the Settlement Agreement having been made in accordance with the provisions of the Settlement Agreement. 8. ASSIGNMENT AND TRANSFER. 8.1 Burden and Benefit. This Guaranty shall be binding upon the Secondary Guarantor, its successors and assigns and shall inure to the benefit of the Beneficiary and its successors or assigns. Any reference in this Guaranty to the Secondary Guarantor or the Beneficiary shall be construed to refer to relevant successors and assigns accordingly. 8.2 Transfer by Secondary Guarantor. The Secondary Guarantor s payment obligations under this Guaranty shall be binding on any legal successor or assign of the Secondary Guarantor in accordance with the requirements of Paragraph 5.5 of the Settlement Agreement. 8.3 Transfer by Beneficiary. No portion of this Guaranty shall provide any rights to, or be enforceable by, any person or entity other than the Beneficiary and the Secondary Guarantor, and the Beneficiary may not assign or otherwise convey any right to enforce any provision of this Guaranty. Without limiting the foregoing, any assignment of the Beneficiary s rights of payment under the Settlement Agreement shall be with recourse to the Beneficiary only and without recourse to the Secondary Guarantor. 9. COMMUNICATIONS. 9.1 Addresses. (a) (b) Secondary Guarantor: Any demand or other communication made of the Secondary Guarantor under this Guaranty shall be delivered or sent by post registered or certified, return receipt requested, postage prepaid or facsimile to the Secondary Guarantor at its office located at 1 St James's Square, London, SW1Y 4PD, United Kingdom, Fax Number +44 (0) , Attention: Group Treasurer, with a copy to the Group General Counsel at the same address, Fax Number: +44 (0) or to such other address and/or addressed to such other officers as may be provided in writing by the Secondary Guarantor to the Beneficiary for such purpose and shall be deemed to have been made when received by the Secondary Guarantor. Beneficiary: Any communication made of the Beneficiary under this Guaranty shall be delivered or sent by post or facsimile to the Beneficiary 47

166 in accordance with the terms of Section 7 (Notice) of the Settlement Agreement. 10. AMENDMENTS. No amendment or other modification of the terms of this Guaranty, including without limitation, those related to payment terms, shall be effective unless in writing and signed by Secondary Guarantor and the Beneficiary and stating that it is expressly intended to give effect to the applicable amendment or modification hereto. No waiver of any provision of this Guaranty nor consent to any departure by the Secondary Guarantor therefrom, including without limitation, those related to payment terms, shall in any event be effective unless such waiver or consent shall refer to this Guaranty, be in writing, and be signed by the Beneficiary. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 11. THIRD PARTY RIGHTS. This Guaranty is for the exclusive benefit and convenience of the Secondary Guarantor and the Beneficiary. Nothing contained herein shall be construed as granting, vesting, creating, or conferring any right of action or any other right or benefit upon any other third party, and no third party shall have any right to enforce or enjoy the benefit of any term of this Guaranty. 12. GOVERNING LAW AND JURISDICTION. This Guaranty shall in all respects be governed by and construed in accordance with the laws of New York without regard or reference to the conflict of law principles of any jurisdiction (other than the provisions of Section of the General Obligations Law of the State of New York, which shall be applicable). The Secondary Guarantor and the Beneficiary each hereby irrevocably agree to the exclusive jurisdiction and venue of the United States District Court for the Eastern District of Louisiana in MDL 2179 (the Court ) (and appellate courts thereof). The United States District Court for the Eastern District of Louisiana and appellate courts thereof are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Guaranty. Further, upon termination of MDL 2179, any legal action or proceedings arising out of or in connection with this Guaranty shall be brought in the Court, and the Secondary Guarantor and the Beneficiary irrevocably submit to the exclusive jurisdiction and venue of the Court with respect to this Guaranty. THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK 48

167 IN WITNESS WHEREOF, this Guaranty has been executed and delivered as of the date indicated in the beginning. EXECUTED by: BP p.l.c. By: Title: Date: 49

168 The undersigned acknowledges and agrees to the foregoing Secondary Guaranty by BP p.l.c. in favor of the State of [Beneficiary]: Date: [Name] Governor State of [Beneficiary] 50

169 The undersigned acknowledges and agrees to the foregoing Secondary Guaranty by BP p.l.c. in favor of the State of [Beneficiary]: Date: [Name] Attorney General State of [Beneficiary] 51

170 PRIMARY GUARANTY

171 (THIS PAGE INTENTIONALLY LEFT BLANK)

172 PRIMARY GUARANTY BY BP CORPORATION NORTH AMERICA INC. IN FAVOR OF THE STATE OF ALABAMA RELATING TO THE SETTLEMENT AGREEMENT BETWEEN THE GULF STATES AND THE BP ENTITIES WITH RESPECT TO ECONOMIC AND OTHER CLAIMS ARISING FROM THE DEEPWATER HORIZON INCIDENT 1

173 1. Guaranty 2. Unconditional Guaranty 3. Waiver 4. Subrogation 5. Notices 6. A Valid Demand, When Required, and Payment 7. No Waiver; Remedies 8. Term; Termination 9. Assignment; Successors and Assigns 10. No Third Party Beneficiaries 11. Amendments 12. Captions 13. Representations and Warranties 14. Severability 15. Jurisdiction 16. Governing Law 2

174 PRIMARY GUARANTY This Primary Guaranty (the Guaranty ) is made the 5th day of October, 2015 and effective as of the Effective Date (as defined in the Settlement Agreement) by BP Corporation North America Inc., an Indiana corporation, ( Primary Guarantor ), in favor of the State of Alabama (the Beneficiary ). WHEREAS, the Beneficiary, as well as the States of Florida, Louisiana, Mississippi, and Texas, on the one hand, and BP Exploration & Production Inc. ("BPXP"), the Primary Guarantor, and BP p.l.c., on the other hand, are parties to that Settlement Agreement between the Gulf States and the BP Entities with respect claims arising from the Deepwater Horizon Incident dated October 5, 2015 (the Settlement Agreement ) giving rise to those payment obligations due from BPXP to the Beneficiary as more fully described and set forth in Paragraph 3.1 of and in Attachment 1 to the Settlement Agreement (the Guaranteed Obligations ); WHEREAS, the Primary Guarantor is an indirect parent of BPXP; and WHEREAS, for the benefit of the Beneficiary, the Primary Guarantor has agreed to provide this Guaranty pursuant to Section V (Financial Assurance)of the Settlement Agreement. NOW, THEREFORE, in consideration of good and valuable consideration to the Primary Guarantor, including the Settlement Agreement, the adequacy, receipt and sufficiency of which are hereby acknowledged, the Primary Guarantor hereby agrees as follows: 1. GUARANTY. (a) (b) The Primary Guarantor hereby irrevocably and unconditionally guarantees that if (i) BPXP has failed to make a payment required under the Settlement Agreement within sixty (60) days after such payment has become due under the Settlement Agreement; or (ii) BPXP has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or (iii) any third-party has petitioned a court to place BPXP in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief is entered, and any such filing or petition is not dismissed within sixty (60) days of entry of such order for relief (any of (i), (ii) or (iii) immediately above, a BPXP Default ), the Primary Guarantor shall within sixty (60) days pay to the Beneficiary the unpaid Guaranteed Obligations then due and payable by BPXP to the Beneficiary in accordance with the payment terms of the Settlement Agreement. The Primary Guarantor shall reimburse the Beneficiary for all sums paid to the Beneficiary by BPXP with respect to such Guaranteed Obligations which the Beneficiary is subsequently required to return to BPXP or a representative of BPXP's creditors as a result of BPXP's bankruptcy, insolvency, liquidation, or similar proceeding. 3

175 (c) (d) In respect of subsection 1(b), this Guaranty shall be a continuing guaranty of all of theguaranteedobligationsandshallapplytoandsecureanyultimatebalancedueor remaining unpaid to the Beneficiary; and this Guaranty shall not be considered as wholly or partially satisfied by the payment or liquidation at any time of any sum of money for the time being due or remaining unpaid to the Beneficiary. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Beneficiary on the insolvency, bankruptcy or reorganization of BPXP or the Primary Guarantor or otherwise, all as though such payment had not been made. A. The Primary Guarantor's obligations and liability under this Guaranty shall be limited to payment obligations only. 2. UNCONDITIONAL GUARANTY. Save due performance by BPXP or the Primary Guarantor, the liability of Primary Guarantor under this Guaranty shall not be limited, lessened or discharged by any of the following: (a) (b) (c) any incapacity or disability or lack or limitation of status or power of BPXP or that BPXP may not be a legal entity; the bankruptcy or insolvency of BPXP; or any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of the Guaranteed Obligations or the rights of the Beneficiary with respect thereto; B. The obligations of the Primary Guarantor hereunder are several and not joint with BPXP or any other person, and are primary obligations for which the Primary Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guaranty, except as expressly contained herein or as set forth in the Settlement Agreement. It shall not be necessary for the Beneficiary, in order to enforce payment by the Primary Guarantor under this Guaranty, to exhaust any of its remedies or recourse against BPXP, any other guarantor, or any other person liable for the payment, and the Primary Guarantor s obligations hereunder shall apply regardless of whether recovery of all such Guaranteed Obligations may be discharged or uncollectible in any bankruptcy, insolvency or other proceeding, or otherwise unenforceable. 3. WAIVER. Except as set forth in the Settlement Agreement or this Guaranty, the Primary Guarantor hereby waives: (a) (b) notice of acceptance of this Guaranty, notice of the creation or existence of any of the Guaranteed Obligations, and notice of any action by the Beneficiary in reliance hereon or in connection herewith; presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest, or any other notice of any other kind with respect to the Guaranteed Obligations; 4

176 (c) (d) any requirement that suit be brought against, or any other action by the Beneficiary be taken against, or any notice of default or other notice to be given to, or any demand be made on BPXP or any other person, or that any other action be taken or not taken as a condition to the Primary Guarantor's liability for the Guaranteed Obligations under this Guaranty or as a condition to the enforcement of this Guaranty against the Primary Guarantor; and any other circumstance which might otherwise constitute a defense, set-off or counterclaim available to, or a legal or equitable discharge of, BPXP in respect of the Guaranteed Obligations or the Primary Guarantor in respect of this Guaranty. 4. SUBROGATION. The Primary Guarantor shall be subrogated to all rights of the Beneficiary against BPXP in respect of any amounts paid by the Primary Guarantor pursuant to the Guaranty, provided that the Primary Guarantor waives any rights it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise (including, without limitation, any statutory rights of subrogation under Section 509 of the Bankruptcy Code, 11 U.S.C. 509, or otherwise), reimbursement, exoneration, contribution, indemnification, or any right to participate in any claim or remedy of the Beneficiary against BPXP or any collateral which the Beneficiary now has or acquires, until all of the Guaranteed Obligations due the Beneficiary shall have been irrevocably and indefeasibly paid to the Beneficiary in full. If (a) the Primary Guarantor shall perform and shall make payment to the Beneficiary of all or any part of the Guaranteed Obligations due such Beneficiary, and (b) all such Guaranteed Obligations due the Beneficiary shall have been indefeasibly paid in full, the Beneficiary shall, at the Primary Guarantor's request, execute and deliver to the Primary Guarantor appropriate documents necessary to evidence the transfer by subrogation to the Primary Guarantor of any interest in such Guaranteed Obligations resulting from such payment of the Primary Guarantor. 5. NOTICES. Notice will be provided in accordance with the terms of Section VII (Notice) of the Settlement Agreement. 6. A VALID DEMAND, WHEN REQUIRED, AND PAYMENT. (a) With respect to any payments required pursuant to Paragraph 5.7 of the Settlement Agreement, the Primary Guarantor is only liable to pay under this Guaranty in accordance with Section 1 hereof if the Primary Guarantor receives from Beneficiary a demand in writing that (i) references this Guaranty, the Guaranteed Obligations due but unpaid to the Beneficiary, and the existence and continuance of a BPXP Default, (ii) is signed by a duly authorized representative of the Beneficiary and (iii) is delivered to the Primary Guarantor pursuant to Section 5 hereof. The Primary Guarantor shall pay, or cause to be paid, Guaranteed Obligations for which a demand is required within sixty (60) days of receipt of such demand, unless, within sixty (60) days, the BPXP Default giving rise to such demand has been paid in full or otherwise remedied by agreement of the Beneficiary and BPXP. 5

177 C. With respect to all other payments required in the Settlement Agreement, no notice, presentment, or demand shall be required under this Guaranty. The Primary Guarantor shall pay, or cause to be paid, such Guaranteed Obligations within sixty (60) days of the BPXP Default unless the BPXP Default has been paid in full or otherwise remedied by agreement of the Beneficiary and BPXP. 7. NO WAIVER; REMEDIES. No failure on the part of the Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 8. TERM; TERMINATION. This Guaranty shall not take effect until the Effective Date (as defined in the Settlement Agreement) of the Settlement Agreement. This Guaranty shall be and continue to be in full force and effect from the Effective Date until (the earliest of) (i) the date the Guarantied Obligations to the Beneficiary under the Settlement Agreement have been fully and indefeasibly paid; (ii) the date that this Guaranty has been replaced by an alternative financial assurance instrument as provided for in Paragraph 5.6 of the Settlement Agreement; or (iii) the date the Settlement Agreement has been terminated or is held invalid or unenforceable by a court. This Guaranty shall terminate in full on the earliest date upon which any of conditions (i), (ii), or (iii) in the foregoing sentence has been satisfied. 9. ASSIGNMENT; SUCCESSORS AND ASSIGNS. (a) (b) The Primary Guarantor s payment obligations under this Guaranty shall be binding on any legal successor or assign of the Primary Guarantor in accordance with the requirements of Paragraph 5.5 of the Settlement Agreement. No portion of this Guaranty shall provide any rights to, or be enforceable by, any person or entity other than the Beneficiary and the Primary Guarantor, and the Beneficiary may not assign or otherwise convey any right to enforce any provision of this Guaranty. Without limiting the foregoing, any assignment of the Beneficiary s rights of payment under the Settlement Agreement shall be with recourse to the Beneficiary only and without recourse to the Primary Guarantor. 10. NO THIRD PARTY BENEFICIARIES. This Guaranty is for the exclusive benefit and convenience of the Primary Guarantor and the Beneficiary. Nothing contained herein shall be construed as granting, vesting, creating, or conferring any right of action or any other right or benefit upon any other third party. 11. AMENDMENTS. No amendment or other modification of the terms of this Guaranty, including without limitation, those related to payment terms, shall be effective unless it is in writing, is signed by Primary Guarantor and the Beneficiary, and states that it is expressly intended to give effect to the applicable amendment or modification hereto. No waiver of any provision of this Guaranty nor consent to any departure by the Primary Guarantor therefrom, including without limitation, those related to payment terms, shall in any event be effective unless such waiver or consent shall refer to this Guaranty, be in writing, and be signed by the Beneficiary. Any such waiver or consent shall be effective only in the specific instance and for 6

178 the specific purpose for which it was given. 12. CAPTIONS. The captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions. 13. REPRESENTATIONS AND WARRANTIES. The Primary Guarantor represents and warrants as follows: (a) (b) (c) (d) the Primary Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Indiana. the Primary Guarantor has full power and authority to execute, deliver, and perform its obligations under this Guaranty, and no limitation on the powers of the Primary Guarantor will be exceeded as a result of entering into this Guaranty; the execution, delivery, and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not contravene the Primary Guarantor's constitutional documents; and this Guaranty constitutes the legal, valid, and binding obligation of the Primary Guarantor, enforceable against it by the Beneficiary in accordance with its terms, subject to applicable law. 14. SEVERABILITY. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. 15. JURISDICTION. The Primary Guarantor and the Beneficiary each hereby irrevocably agree to the exclusive jurisdiction and venue of the United States District Court for the Eastern District of Louisiana in MDL 2179 (the Court ). The United States District Court for the Eastern District of Louisiana (and appellate courts thereof) are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Guaranty. Further, upon termination of MDL 2179, any legal action or proceedings arising out of or in connection with this Guaranty shall be brought in the Court, and the Primary Guarantor and the Beneficiary irrevocably submit to the exclusive jurisdiction and venue of the Court with respect to this Guaranty. 16. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD OR REFERENCE TO THE CONFLICT OF LAWS PRINCIPLES OF ANY JURISDICTION. 7

179 For the benefit of the State of Alabama IN WITNESS WHEREOF, the Primary Guarantor has caused this Guaranty to be dul exefute and delivered by its duly authorized officer on this ~ day of Q ;trw.,2015 but this Guaranty shall be effective as of the Effective Date (as defmed in the Settlement Agreement). BP CORPORATION NORTH AMERICA INC. By: Eric L. Nitcher Assistant General Counsel, BPCNA 501 Westlake Blvd Houston, TX

180 The llildersigned aclmowledges and agrees to the foregoing Primary Guaranty by BP Corporation North America Inc. in favor of the State of Alabama: Date: Robert J. Bentley Governor State of Alabama 38

181 The lmdersigned acknowledges and agrees to the foregoing Prilnary Guaranty by BP Corporation North America Inc. in favor of the State of Alabama: Date: AttOlney General State of Alabatlla 39

182 SECONDARY GUARANTY

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184 SECONDARY GUARANTY BY BP P.L.C. IN FAVOR OF THE STATE OF ALABAMA RELATING TO THE SETTLEMENT AGREEMENT BETWEEN THE GULF STATES AND THE BP ENTITIES WITH RESPECT TO ECONOMIC AND OTHER CLAIMS ARISING FROM THE DEEPWATER HORIZON INCIDENT 1

185 1. Definitions and Interpretation 2. Guaranty 3. Limitation on Exercise of Secondary Guarantor s Rights 4. A Valid Demand; When Required Under the Guaranty 5. No Implied Waivers 6. Representations and Warranties 7. Amendment to the Agreement 8. Assignment and Transfer 9. Communications 10. Amendments 11. Third Party Rights 12. Governing Law and Jurisdiction 2

186 SECONDARY GUARANTY This Secondary Guaranty is made the 5th day of October, 2015 and is effective as of the Effective Date (as defined in the Settlement Agreement (as defined below)) by BP p.l.c., a company incorporated in England whose registered office is at 1 St. James's Square, London, SW1Y 4PD England ( Secondary Guarantor ), in favor of the State of Alabama ( Beneficiary ). WHEREAS, the Beneficiary, as well as the States of Florida, Louisiana, Mississippi, and Texas, on the one hand, and BP Exploration & Production Inc. ( BPXP ), a wholly-owned indirect subsidiary of the Secondary Guarantor, BP Corporation North America ( BPCNA ) and the Secondary Guarantor, on the other hand, have entered into a Settlement Agreement between the Gulf States and the BP Entities with respect to economic and other claims arising from the Deepwater Horizon Incident, dated October 5, 2015 (the "Settlement Agreement"); WHEREAS, BPCNA (the "Primary Guarantor"), another wholly-owned indirect subsidiary of the Secondary Guarantor, and indirect parent company of BPXP, has agreed to guarantee for the benefit of the Beneficiary the Guaranteed Obligations to the Beneficiary (such guarantee, the "Primary Guaranty"); WHEREAS, the Secondary Guarantor has agreed to provide this Guaranty pursuant to Section V (Financial Assurance) of the Settlement Agreement; AND WHEREAS, in consideration of good and valuable consideration to the Secondary Guarantor, including the Settlement Agreement, the adequacy, receipt and sufficiency of which are hereby acknowledged by the Secondary Guarantor; NOW THIS GUARANTY PROVIDES as follows: 1. DEFINITIONS AND INTERPRETATION. 1.1 Definitions. In this Guaranty, except to the extent that the context requires otherwise, terms defined and references construed in the Settlement Agreement shall have the same meanings and construction when used in this Guaranty and, in addition, unless the context otherwise requires, any reference to: (a) "BPCNA Default" means a BPXP Default has occurred and either (i) BPCNA has failed to make a payment required under the Primary Guaranty within sixty (60) Days after a BPXP Default; or (ii) BPCNA has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or (iii) any third party has petitioned a court to place BPCNA in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief is entered, and any such filing or petition has not been dismissed within sixty (60) Days of such order for 3

187 relief. (b) (c) (d) (e) (f) BPXP Default means either (i) BPXP has failed to make a payment required under the Consent Decree within sixty (60) Days after such payment has become due under the Consent Decree; or (ii) BPXP has filed for bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency; or (iii) any third party has petitioned a court to place BPXP in bankruptcy under the United States Bankruptcy Code or other applicable statute(s) or code(s) pertaining to insolvency, an order for relief is entered, and any such filing or petition has not been dismissed within sixty (60) Days of such order for relief. Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London and New York. Day means a calendar day unless expressly stated to be a Business Day. Guaranteed Obligations means any sum of money of any kind owed by BPXP to the Beneficiary under the Settlement Agreement. Valid Demand means a demand issued by the Beneficiary in accordance with Paragraph Interpretation of certain references. (a) (b) (c) (d) (e) This Guaranty means this Secondary Guaranty, as amended, supplemented, novated, restated, or replaced by any document from time to time and any document which amends, supplements, novates, restates, or replaces this Guaranty. A law includes common or customary law and any constitution, decree, judgment, legislation, order, ordinance, regulation, statute, treaty or other legislative measure, in each case of any jurisdiction whatever. Any obligation of any Person under this Guaranty or any other document referenced herein is a reference to an obligation expressed to be assumed by that Person or imposed on that Person under this Guaranty or that other document, as the case may be. A Person includes any individual, company, corporation, firm, partnership, joint venture, association, organization, trust, state or agency of a state. A BPXP Default and/or a BPCNA Default is continuing ifithas not been remedied. 4

188 2. GUARANTY. 2.1 Guaranty. As consideration for the Beneficiary s entry into the Settlement Agreement and subject to the terms of this Guaranty, including, without limitation, the occurrence and continuance of a BPXP Default and a BPCNA Default, the Secondary Guarantor hereby irrevocably, unconditionally, and absolutely guarantees for the benefit of the Beneficiary, that if (i) there exists and is continuing a BPXP Default, and (ii) there exists and is continuing a BPCNA Default, the Secondary Guarantor shall, within fifteen (15) Business Days of such BPCNA Default, pay to such Beneficiary the unpaid Guaranteed Obligations then due and payable by BPXP to such Beneficiary. The Beneficiary acknowledges that the obligations under this Paragraph 2.1 shall have no effect unless both a BPXP Default and a BPCNA Default shall have occurred and are continuing, and in such instances this Guaranty remains irrevocable, unconditional, and absolute as described in this Guaranty. The Secondary Guarantor's obligations and liability under this Guaranty shall be limited to payment obligations only. 2.2 Secondary Guarantor as Principal Debtor. As between the Secondary Guarantor and the Beneficiary, but without affecting BPXP's obligations, the Secondary Guarantor shall be liable under this Guaranty as if it were the sole principal debtor and not merely a surety. Accordingly, except as otherwise provided in this Guaranty (including, without limitation, Paragraph 2.4), the liability of the Secondary Guarantor under this Guaranty shall not be released, affected or discharged by any act, matter, or omission which (but for this Paragraph) would have released, affected, or discharged the liability of the Secondary Guarantor, including without limitation, any of the following: (a) (b) (c) any incapacity or disability or lack or limitation of status or power of BPXP or BPCNA or that BPXP or BPCNA may not be a legal entity; the bankruptcy or insolvency of BPXP or BPCNA; or any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of the Guaranteed Obligations or the rights of the Beneficiary with respect thereto. 2.3 Secondary Guarantor's Obligations Additional. This Guaranty shall be in addition to and not in substitution for any other rights, remedy, security, or guarantees which the Beneficiary may now or hereafter hold from or on account of the Guaranteed Obligations and subject to a BPXP Default and a BPCNA Default having occurred and being continuing, may be enforced without first having recourse to such other rights, remedy, security, or guarantees. 2.4 Secondary Guarantor's Obligations Continuing. The Secondary Guarantor's obligations under this Guaranty are and remain in full force and effect by way of continuing security, until the earliest of the following: (a) all Guaranteed Obligations payable by BPXP to the Beneficiary under the Settlement Agreement have been paid in full; 5

189 (b) (c) the replacement of this Guaranty by an alternative financial assurance instrument as provided by Paragraph 5.6 of the Settlement Agreement; and the date the Settlement Agreement has been terminated in accordance with its terms, or is held invalid or unenforceable by a court. This Guaranty shall terminate in full on the earliest date upon which any of the conditions (a), (b), or (c) of this Paragraph 2.4 has been satisfied with respect to the Guaranteed Obligations due to the Beneficiary. Unless terminated pursuant to Paragraphs 2.4(a), (b), or (c), the Secondary Guarantor s obligations remain in effect in each case, notwithstanding absorption, amalgamation, or any other changes in the Secondary Guarantor's constitution. 2.5 No Avoidance of Payment. Ifallorpartofanypaymentreceivedorrecovered by the Beneficiary in respect of the Guaranteed Obligations is, on the subsequent bankruptcy, insolvency, corporate reorganization or other similar event of BPXP, avoided or set aside under any laws relating to bankruptcy, insolvency, corporate reorganization or other such similar events, and the amount of such payment is required to be refunded to BPXP or other Persons entitled through BPXP, such payment shall not be considered as discharging or diminishing the liability of the Secondary Guarantor and this Guaranty shall continue to apply as if such amount had at all times remained owing by BPXP. 3. LIMITATION ON EXERCISE OF SECONDARY GUARANTOR'S RIGHTS. Notwithstanding any payment or payments made by the Secondary Guarantor hereunder, so long as any Guaranteed Obligation remains outstanding: (a) (b) the Secondary Guarantor hereby irrevocably waives any right of subrogation to the rights of the Beneficiary against BPXP and any right to be reimbursed or indemnified by BPXP or by any other guarantor of all or any part of the Guaranteed Obligations until such time as all the Guaranteed Obligations due the Beneficiary shall have been irrevocably and indefeasibly paid to the Beneficiary in full; and if, notwithstanding the foregoing, any amount is received or recovered by the Secondary Guarantor as a result of exercising such rights, such amount shall be held by the Secondary Guarantor in trust for the Beneficiary and shall, forthwith upon receipt by the Secondary Guarantor, be paid to the Beneficiary, to be applied against the Guaranteed Obligations due to the Beneficiary in such order as the Beneficiary may determine. 4. A VALID DEMAND; WHEN REQUIRED UNDER THE GUARANTY. 4.1 When Secondary Guarantor's Liability Is Subject to Valid Demand. With respect to any payments required of BPXP pursuant to Paragraph 5.7 of the Settlement Agreement, the Secondary Guarantor is only liable to pay under this Guaranty in accordance with Paragraph 2.1 if it receives from the Beneficiary a demand in writing complying with Paragraph 4.2 ( Valid Demand ). With respect to all other payments 6

190 required of BPXP pursuant to the Settlement Agreement, no demand shall be required under this Guaranty. 4.2 Valid Demand. (a) (a) The Beneficiary may only issue a Valid Demand to the Secondary Guarantor under this Guaranty at least five (5) Business Days after it has sent a written notification to BPXP and the Primary Guarantor of its intention to make a demand under this Guaranty (and which notification may not in any event be sent before a BPXP Default and a BPCNA Default have occurred and are continuing) stating the reasons for making such demand and identifying the Guaranteed Obligations due but unpaid to the Beneficiary in respect of which there has been a BPXP Default and a BPCNA Default. Any Valid Demand made of the Secondary Guarantor under this Guaranty shall be accompanied with a copy of a written notification referred to in Paragraph 4.2(a), dated and sent to BPXP and the Primary Guarantor no less than five (5) Business Days before the date of the demand, and delivered or sent by post or facsimile to the Secondary Guarantor at its address as provided under Section NO IMPLIED WAIVERS. No failure on the part of the Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof, or the exercise of any other right. 6. REPRESENTATIONS AND WARRANTIES. The Secondary Guarantor hereby represents and warrants to the Beneficiary that: (a) (b) (c) (d) the Secondary Guarantor is duly incorporated and is a validly existing company under the laws of its place of incorporation, has the capacity to sue or be sued in its own name, and has power to carry on its business as now being conducted and to own its property and other assets; the Secondary Guarantor has full power and authority to execute, deliver, and perform its obligations under this Guaranty, and no limitation on the powers of the Secondary Guarantor will be exceeded as a result of the Secondary Guarantor entering into this Guaranty; the execution, delivery, and performance by the Secondary Guarantor of this Guaranty and the performance of its obligations under this Guaranty have been duly authorized by all necessary corporate action and do not contravene or conflict with the Secondary Guarantor's memorandum and articles of association; and this Guaranty constitutes the legal, valid, and binding obligation of the 7

191 Secondary Guarantor, enforceable against it by the Beneficiary in accordance with its terms, subject to applicable law. 7. AMENDMENT TO THE SETTLEMENT AGREEMENT. The Secondary Guarantor's obligations under this Guaranty are subject to modification of the terms of the Settlement Agreement having been made in accordance with the provisions of the Settlement Agreement. 8. ASSIGNMENT AND TRANSFER. 8.1 Burden and Benefit. This Guaranty shall be binding upon the Secondary Guarantor, its successors and assigns and shall inure to the benefit of the Beneficiary and its successors or assigns. Any reference in this Guaranty to the Secondary Guarantor or the Beneficiary shall be construed to refer to relevant successors and assigns accordingly. 8.2 Transfer by Secondary Guarantor. The Secondary Guarantor s payment obligations under this Guaranty shall be binding on any legal successor or assign of the Secondary Guarantor in accordance with the requirements of Paragraph 5.5 of the Settlement Agreement. 8.3 Transfer by Beneficiary. No portion of this Guaranty shall provide any rights to, or be enforceable by, any person or entity other than the Beneficiary and the Secondary Guarantor, and the Beneficiary may not assign or otherwise convey any right to enforce any provision of this Guaranty. Without limiting the foregoing, any assignment of the Beneficiary s rights of payment under the Settlement Agreement shall be with recourse to the Beneficiary only and without recourse to the Secondary Guarantor. 9. COMMUNICATIONS. 9.1 Addresses. (a) (b) Secondary Guarantor: Any demand or other communication made of the Secondary Guarantor under this Guaranty shall be delivered or sent by post registered or certified, return receipt requested, postage prepaid or facsimile to the Secondary Guarantor at its office located at 1 St James's Square, London, SW1Y 4PD, United Kingdom, Fax Number +44 (0) , Attention: Group Treasurer, with a copy to the Group General Counsel at the same address, Fax Number: +44 (0) or to such other address and/or addressed to such other officers as may be provided in writing by the Secondary Guarantor to the Beneficiary for such purpose and shall be deemed to have been made when received by the Secondary Guarantor. Beneficiary: Any communication made of the Beneficiary under this Guaranty shall be delivered or sent by post or facsimile to the Beneficiary in accordance with the terms of Section 7 (Notice) of the Settlement 8

192 Agreement. 10. AMENDMENTS. No amendment or other modification of the terms of this Guaranty, including without limitation, those related to payment terms, shall be effective unless in writing and signed by Secondary Guarantor and the Beneficiary and stating that it is expressly intended to give effect to the applicable amendment or modification hereto. No waiver of any provision of this Guaranty nor consent to any departure by the Secondary Guarantor therefrom, including without limitation, those related to payment terms, shall in any event be effective unless such waiver or consent shall refer to this Guaranty, be in writing, and be signed by the Beneficiary. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 11. THIRD PARTY RIGHTS. This Guaranty is for the exclusive benefit and convenience of the Secondary Guarantor and the Beneficiary. Nothing contained herein shall be construed as granting, vesting, creating, or conferring any right of action or any other right or benefit upon any other third party, and no third party shall have any right to enforce or enjoy the benefit of any term of this Guaranty. 12. GOVERNING LAW AND JURISDICTION. This Guaranty shall in all respects be governed by and construed in accordance with the laws of New York without regard or reference to the conflict of law principles of any jurisdiction (other than the provisions of Section of the General Obligations Law of the State of New York, which shall be applicable). The Secondary Guarantor and the Beneficiary each hereby irrevocably agree to the exclusive jurisdiction and venue of the United States District Court for the Eastern District of Louisiana in MDL 2179 (the Court ) (and appellate courts thereof). The United States District Court for the Eastern District of Louisiana and appellate courts thereof are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Guaranty. Further, upon termination of MDL 2179, any legal action or proceedings arising out of or in connection with this Guaranty shall be brought in the Court, and the Secondary Guarantor and the Beneficiary irrevocably submit to the exclusive jurisdiction and venue of the Court with respect to this Guaranty. THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK 9

193 For the benefit of the State of Alabama IN WITNESS WHEREOF, this Secondary Guaranty has been executed and delivered as of the date indicated in the beginning. EXECUTED by: BP p.l.c.,. By: ~ t. ;J~ Eric L. Nitcher Assistant General Counsel, BPCNA 501 Westlake Blvd Houston, TX

194 The undersigned acknowledges and agrees to the foregoing Secondary Guaranty by BP Corporation North America Inc. in favor of the State of Alabama: Date: Robert 1. Bentley Governor State of Alabama 50

195 The W1dersigned acknowledges and agrees to the foregoing Secondary Guaranty by BP Corporation North America Inc. in favor of the State of Alabama: Date: L1~~N~~~S(:: Attorney General State of Alabruna 51

196 APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL

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198 APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL, 20 Holders of the Bonds referred to below Re: $ BP Settlement Revenue Bonds, Series 2016-A and $ Taxable BP Settlement Revenue Bonds, Series 2016-B, issued by Alabama Economic Settlement Authority We have acted as bond counsel to Alabama Economic Settlement Authority (the "Authority") in connection with the issuance by the Authority of its $ aggregate principal amount of BP Settlement Revenue Bonds, Series 2016-A (the "Series 2016-A Bonds") and its $ aggregate principal amount of Taxable BP Settlement Revenue Bonds, Series 2016-B (the "Series 2016-B Bonds" and together with the Series 2016-A Bonds herein the "Bonds"). The Bonds are being issued pursuant to Act No adopted during the 2016 First Special Session of the Alabama Legislature (the "Enabling Law") and a resolution (the "Bond Resolution") adopted by the directors of the Authority. Capitalized terms used but not otherwise defined herein will have the meanings assigned in the Bond Resolution. The Series 2016-A Bonds and Series 2016-B Bonds are secured on a parity of lien by a pledge of (i) the BP Settlement Revenues deposited in the BP Settlement Fund, and any investment earning thereon, that are pledged and appropriated to the payment of the principal, interest and premium (if any) on the Authority's bonds pursuant to the Enabling Law and (ii) moneys and investments held in the Debt Service Fund established under the Bond Resolution (collectively, the "Pledged Funds"). The Bond Resolution provides that the Authority may issue Additional Bonds on a parity of lien with the Bonds upon satisfaction of certain conditions set forth in the Bond Resolution. In addition to the Pledged Funds, the Series 2016-A Bonds are secured by a pledge of amounts on deposit in the Series 2016-A Capitalized Interest Fund, and the Series 2016-B Bonds are secured by a pledge of amounts on deposit in the Series 2016-B Capitalized Interest Fund. In our capacity as Bond Counsel we have examined such documents, records of the Authority and other instruments as we deem necessary to enable us to express the opinions set forth below, including a certified copy of the Bond Resolution. We have not examined any of the Bonds as executed, but have been furnished with appropriate certificates respecting their execution and authentication. As to questions of fact material to our opinion, we have relied upon the representations of the Authority contained in the Bond Resolution and other certifications of officials of the Authority and others furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, and subject to the qualifications set forth below, we are of the opinion, as of the date hereof and under existing law, that: C-1

199 1. The Authority is validly existing as a public corporation of the State of Alabama with the corporate power to adopt the Bond Resolution, to perform the agreements on its part contained therein and to issue and deliver the Bonds. 2. The Bond Resolution has been duly adopted by the governing body of the Authority and the obligations of the Authority thereunder constitute legal, valid and binding limited obligations of the Authority enforceable in accordance with the terms thereof. 3. The issuance and sale of the Bonds have been duly authorized by the Authority; the Bonds have been duly executed and delivered by the Authority and authenticated by the State Treasurer; and the Bonds are legal, valid and binding limited obligations of the Authority. The Series 2016-A Bonds are payable solely from, and secured by a valid pledge of, the Pledged Funds and the Series 2016-A Capitalized Interest Fund. The Series 2016-B Bonds are payable solely from the Pledged Funds and the Series 2016-B Capitalized Interest Fund. The pledge of the Pledged Funds provided in the Bond Resolution for the benefit Bonds is on a parity of lien with any Additional Bonds hereafter issued. 4. Interest on the Series 2016-A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on certain corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. The opinion set forth in the preceding sentence is subject to the condition that the Authority comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Series 2016-A Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Series 2016-A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2016-A Bonds. 5. Interest on the Series 2016-B Bonds is not excluded from gross income for federal income tax purposes. 6. Interest on the Bonds is exempt from present income taxation imposed by the State of Alabama. We express no opinion regarding federal or state tax consequences arising with regard to the Bonds, other than the opinions expressed in paragraphs 4, 5 and 6 above. We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement relating to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Bond Resolution may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights, (ii) sovereign immunity and (iii) general principles of equity, including the exercise of judicial discretion, which may limit the specific enforcement of certain remedies. C-2

200 The opinions expressed herein are limited to the application of the laws of the State of Alabama and the federal laws of the United States of America, and do not extend to any laws of any other state or nation. This opinion is given as of the date hereof and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Yours very truly, C-3

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202 APPENDIX D THE DTC BOOK-ENTRY ONLY SYSTEM

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204 APPENDIX D THE DTC BOOK-ENTRY ONLY SYSTEM Portions of the following information concerning The Depository Trust Company ("DTC") and DTC's book-entry system have been obtained from DTC. The Authority, the State Treasurer, in its capacity as paying agent for the Series 2016 Bonds, and the Underwriters make no representation as to the accuracy of such information. General. Initially, DTC will act as Securities Depository for the Series 2016 Bonds. The Series 2016 Bonds initially will be issued solely in book-entry form to be held under DTC's book-entry system, registered in the name of Cede & Co. (DTC's partnership nominee). Initially, one fully-registered Series 2016 Bond certificate for each maturity will be issued for the Series 2016 Bonds, in the aggregate principal amount of Series 2016 Bonds of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Series 2016 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016 Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2016 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2016 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2016 Bonds, except in the event that use of the book-entry system for the Series 2016 Bonds is discontinued.

205 To facilitate subsequent transfers, all Series 2016 Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2016 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2016 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Series 2016 Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2016 Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Series 2016 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2016 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or the State Treasurer, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the State Treasurer, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the State Treasurer, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. In the event of the discontinuance of the book-entry system for the Series 2016 Bonds, Series 2016 Bond certificates will be printed and delivered and the following provisions of the Ordinance will apply: (i) principal of the Series 2016 Bonds will be payable upon surrender of the Series 2016 Bonds at the designated office of the State Treasurer; (ii) Series 2016 Bonds may be transferred or exchanged for other Series 2016 Bonds of authorized denominations as set forth in the next succeeding paragraph; and (iii) Series 2016 Bonds will be issued in denominations as described above under "THE SERIES 2016 BONDS." THE AUTHORITY, THE STATE TREASURER AND THE UNDERWRITERS CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SERIES 2016 BONDS (i) PAYMENTS OF PRINCIPAL OF OR INTEREST AND PREMIUM, IF ANY, ON D-2

206 THE SERIES 2016 BONDS, (ii) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES 2016 BONDS, OR (iii) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE SERIES 2016 BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT "RULES" APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE CURRENT "PROCEDURES" OF DTC TO BE FOLLOWED IN DEALING WITH DIRECT PARTICIPANTS ARE ON FILE WITH DTC. NEITHER THE AUTHORITY, NOR THE STATE TREASURER, NOR THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECT PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO (i) THE SERIES 2016 BONDS; (ii) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (iii) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE SERIES 2016 BONDS; (iv) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO SERIES 2016 BONDHOLDERS; (v) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2016 BONDS; OR (vi) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS SERIES 2016 BONDHOLDER. Discontinuance of Book-Entry Only System. DTC may discontinue providing its services as depository with respect to the Series 2016 Bonds at any time by giving reasonable notice to the Authority or the State Treasurer. Under such circumstances, in the event that a successor depository is not obtained, Series 2016 Bond certificates are required to be printed and delivered to the Series 2016 Bondholders. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2016 Bond certificates will be printed and delivered to the Series 2016 Bondholders. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. D-3

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208 APPENDIX E EXCERPTS FROM BP P.L.C. DECEMBER 31, 2015 ANNUAL REPORT

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210 EXCERPTS FROM BP P.L.C. DECEMBER 31, 2015 ANNUAL REPORT The payment of debt service on the Series 2016 Bonds relies entirely on the ability of the BP Settlement Agreement Parties to timely make the payments required to the State under the Settlement Agreement and Guaranty Agreements, which will be influenced heavily by the financial performance of BP p.l.c., BPCNA, and BPXP. BP p.l.c. submitted its Annual Financial Report for the year ended December 31, 2015 (the BP Annual Report ), pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, which report states certain risks, separately or in combination, which could have a material adverse effect on the implementation of its strategy, business, financial performance, results of operations, cash flows, liquidity, prospects, shareholder value and returns, and reputation. The BP Annual Report was prepared by a third party and may not disclose all risks which could affect the BP Settlement Agreement Parties ability to make payments of BP Settlement Revenues and, consequently, the Authority s ability to pay debt service payments on the Series 2016 Bonds. The Authority has played no role in the preparation of the BP Annual Report. The Authority has not undertaken to update such BP Annual Report or to provide prospective buyers with any additional annual reports prepared by BP p.l.c. The aforesaid excerpts from the BP Annual Report are attached as follows:

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212 Page 1 of 4 Risk factors The risks discussed below, separately or in combination, could have a material adverse effect on the implementation of our strategy, our business, financial performance, results of operations, cash flows, liquidity, prospects, shareholder value and returns and reputation. Strategic and commercial risks Prices and markets - our financial performance is subject to fluctuating prices of oil, gas, refined products, technological change, exchange rate fluctuations, and the general macroeconomic outlook. Oil, gas and product prices are subject to international supply and demand and margins can be volatile. Political developments, increased supply from new oil and gas sources, technological change, global economic conditions and the influence of OPEC can impact supply and demand and prices for our products. Decreases in oil, gas or product prices could have an adverse effect on revenue, margins, profitability and cash flows. If significant or for a prolonged period, we may have to write down assets and re-assess the viability of certain projects, which may impact future cash flows, profit, capital expenditure and ability to maintain our long-term investment programme. Conversely, an increase in oil, gas and product prices may not improve margin performance as there could be increased fiscal take, cost inflation and more onerous terms for access to resources. The profitability of our refining and petrochemicals activities can be volatile, with periodic oversupply or supply tightness in regional markets and fluctuations in demand. Exchange rate fluctuations can create currency exposures and impact underlying costs and revenues. Crude oil prices are generally set in US dollars, while products vary in currency. Many of our major project development costs are denominated in local currencies, which may be subject to fluctuations against the US dollar. Access, renewal and reserves progression - our inability to access, renew and progress upstream resources in a timely manner could adversely affect our long-term replacement of reserves. Delivering our group strategy depends on our ability to continually replenish a strong exploration pipeline of future opportunities to access and produce oil and natural gas. Competition for access to investment opportunities, heightened political and economic risks in certain countries where significant hydrocarbon basins are located and increasing technical challenges and capital commitments may adversely affect our strategic progress. This, and our ability to progress upstream resources and sustain long-term reserves replacement, could impact our future production and financial performance. Major project* delivery - failure to invest in the best opportunities or deliver major projects successfully could adversely affect our financial performance. We face challenges in developing major projects, particularly in geographically and technically challenging areas. Operational challenges and poor investment choice, efficiency or delivery at any major project that underpins production or production growth could adversely affect our financial performance. Geopolitical - we are exposed to a range of political developments and consequent changes to the operating and regulatory environment. We operate and may seek new opportunities in countries and regions where political, economic and social transition may take place. Political instability, changes to the regulatory environment or taxation, international sanctions, expropriation or nationalization of property, civil strife, strikes, insurrections, acts of terrorism and acts of war may disrupt or curtail our operations or development activities. These may in turn cause production to access to financing or engagement in our trading activities on acceptable terms, which could put pressure on the group's liquidity. Credit rating downgrades could trigger a requirement for the company to review its funding arrangements with the BP pension trustees and may cause other impacts on financial performance. In the event of extended constraints on our ability to obtain financing, we could be required to reduce capital expenditure or increase asset disposals in order to provide additional liquidity. See Liquidity and capital resources on page 219 and Financial statements - Note 28. Joint arrangements * and contractors - we may have limited control over the standards, operations and compliance of our partners, contractors and sub-contractors. We conduct many of our activities through joint arrangements, associates * or with contractors and sub-contractors where we may have limited influence and control over the performance of such operations. Our partners and contractors are responsible for the adequacy of the resources and capabilities they bring to a project. If these are found to be lacking, there may be financial, operational or safety risks for BP. Should an incident occur in an operation that BP participates in, our partners and contractors may be unable or unwilling to fully compensate us against costs we may incur on their behalf or on behalf of the arrangement. Where we do not have operational control of a venture, we may still be pursued by regulators or claimants in the event of an incident. Digital infrastructure and cybersecurity - breach of our digital security or failure of our digital infrastructure could damage our operations and our reputation. A breach or failure of our digital infrastructure due to intentional actions such as attacks on our cybersecurity, negligence or other reasons, could seriously disrupt our operations and could result in the loss or misuse of data or sensitive information, injury to people, disruption to our business, harm to the environment or our assets, legal or regulatory breaches and potentially legal liability. These could result in significant costs or reputational consequences. Climate change and carbon pricing - public policies could increase costs and reduce future revenue and strategic growth opportunities. Changes in laws, regulations and obligations relating to climate change could result in substantial capital expenditure, taxes and reduced profitability. In the future, these could potentially impact our assets, revenue generation and strategic growth opportunities. Competition - inability to remain efficient, innovate and retain an appropriately skilled workforce could negatively impact delivery of our strategy in a highly competitive market. Our strategic progress and performance could be impeded if we are unable to control our development and operating costs and margins, or to sustain, develop and operate a high-quality portfolio of assets efficiently. We could be adversely affected if competitors offer superior terms for access rights or licences, or if our innovation in areas such as exploration, production, refining or manufacturing lags the industry. Our performance could also be negatively impacted if we fail to protect our intellectual property. Our industry faces increasing challenge to recruit and retain skilled and experienced people in the fields of science, technology, engineering and mathematics. Successful recruitment, development and retention of specialist staff is essential to our plans. Crisis management and business continuity - potential disruption to our business and operations could occur if we do not address an incident effectively. Our business and operating activities could be disrupted if we do not respond, or are perceived not to respond, in an appropriate manner to any major crisis or if we are not able to restore or replace critical operational capacity. Insurance - our insurance strategy could expose the group to material uninsured losses

213 Page 2 of 4 decline, limit our ability to pursue new opportunities, affect the recoverability of our assets or cause us to incur additional costs, particularly due to the long-term nature of many of our projects and significant capital expenditure required. Events in or relating to Russia, including further trade restrictions and other sanctions, could adversely impact our income and investment in Russia. Our ability to pursue business objectives and to recognize production and reserves relating to Russia could also be adversely impacted. Liquidity, financial capacity and financial, including credit, exposure failure to work within our financial framework could impact our ability to operate and result in financial loss. Failure to accurately forecast, manage or maintain sufficient liquidity and credit could impact our ability to operate and result in financial loss. Trade and other receivables, including overdue receivables, may not be recovered and a substantial and unexpected cash call or funding request could disrupt our financial framework or overwhelm our ability to meet our obligations. An event such as a significant operational incident, legal proceedings or a geopolitical event in an area where we have significant activities, could reduce our credit ratings. This could potentially increase financing costs and limit BP generally purchases insurance only in situations where this is legally and contractually required. We typically bear losses as they arise rather than spreading them over time through insurance premiums. This means uninsured losses could have a material adverse effect on our financial position, particularly if they arise at a time when we are facing material costs as a result of a significant operational event which could put pressure on our liquidity and cash flows. Defined on page 256. BP Annual Report and Form 20-F /17/2016

214 Page 3 of 4 Safety and operational risks Process safety, personal safety, and environmental risks - we are exposed to a wide range of health, safety, security and environmental risks that could result in regulatory action, legal liability, increased costs, damage to our reputation and potentially denial of our licence to operate. Technical integrity failure, natural disasters, human error and other adverse events or conditions could lead to loss of containment of hydrocarbons or other hazardous materials, as well as fires, explosions or other personal and process safety incidents, including when drilling wells, operating facilities and those associated with transportation by road, sea or pipeline. There can be no certainty that our operating management system or other policies and procedures will adequately identify all process safety, personal safety and environmental risks or that all our operating activities will be conducted in conformance with these systems. See Safety on page 43. Such events, including a marine incident, or inability to provide safe environments for our workforce and the public while at our facilities, premises or during transportation, could lead to injuries, loss of life or environmental damage. We could as a result face regulatory action and legal liability, including penalties and remediation obligations, increased costs and potentially denial of our licence to operate. Our activities are sometimes conducted in hazardous, remote or environmentally sensitive locations, where the consequences of such events could be greater than in other locations. Drilling and production - challenging operational environments and other uncertainties can impact drilling and production activities. Our activities require high levels of investment and are often conducted in extremely challenging environments which heighten the risks of technical integrity failure and the impact of natural disasters. The physical characteristics of an oil or natural gas field, and cost of drilling, completing or operating wells is often uncertain. We may be required to curtail, delay or cancel drilling operations because of a variety of factors, including unexpected drilling conditions, pressure or irregularities in geological formations, equipment failures or accidents, adverse weather conditions and compliance with governmental requirements. Security - hostile acts against our staff and activities could cause harm to people and disrupt our operations. Acts of terrorism, piracy, sabotage and similar activities directed against our operations and facilities, pipelines, transportation or digital infrastructure could cause harm to people and severely disrupt business and operations. Our activities could also be severely affected by conflict, civil strife or political unrest. Product quality - supplying customers with off-specification products could damage our reputation, lead to regulatory action and legal liability, and potentially impact our financial performance. Failure to meet product quality standards could cause harm to people and the environment, damage our reputation, result in regulatory action and legal liability, and impact financial performance. Compliance and control risks US government settlements - our settlements with legal and regulatory bodies in the US announced in November 2012 in respect of certain charges related to the Gulf of Mexico oil spill may expose us to further penalties, liabilities and private litigation or could result in suspension or debarment of certain BP entities. Settlements with the US Department of Justice (DoJ) and the US Securities and Exchange Commission (SEC) impose significant compliance and remedial obligations on BP and its directors, officers and employees, including the appointment of an ethics monitor, a process safety monitor and an independent third-party auditor. Failure to comply with the terms of these settlements could result in further enforcement action by the DoJ and the SEC, expose us to severe penalties, financial or otherwise, and subject BP to further private litigation, each of which could impact our operations and have a material adverse effect on the group's reputation and financial performance. Failure to satisfy the requirements or comply with the terms of the administrative agreement with the US Environmental Protection Agency (EPA), under which BP agreed to a set of safety and operations, ethics response to public pressure on finances, resulting in increased amounts payable to them or their agencies. Such factors could increase the cost of compliance, reduce our profitability in certain jurisdictions, limit our opportunities for new access, require us to divest or write down certain assets or curtail or cease certain operations, or affect the adequacy of our provisions for pensions, tax, decommissioning, environmental and legal liabilities. Potential changes to pension or financial market regulation could also impact funding requirements of the group. Following the Gulf of Mexico oil spill, there have been cases of additional oversight and more stringent regulation of BP and other companies' oil and gas activities in the US and elsewhere, particularly relating to environmental, health and safety controls and oversight of drilling operations, which could result in increased compliance costs. In addition, we may be subjected to a higher number of citations and level of fines imposed in relation to any alleged breaches of safety or environmental regulations, which could result in increased costs. Ethical misconduct and non-compliance - ethical misconduct or breaches of applicable laws by our businesses or our employees could be damaging to our reputation, and could result in litigation, regulatory action and penalties. Incidents of ethical misconduct or non-compliance with applicable laws and regulations, including anti-bribery and corruption and anti-fraud laws, trade restrictions or other sanctions, or non-compliance with the recommendations of the ethics monitor appointed under the terms of the DoJ and EPA settlements, could damage our reputation, result in litigation, regulatory action and penalties. Treasury and trading activities - ineffective oversight of treasury and trading activities could lead to business disruption, financial loss, regulatory intervention or damage to our reputation. We are subject to operational risk around our treasury and trading activities in financial and commodity markets, some of which are regulated. Failure to process, manage and monitor a large number of complex transactions across many markets and currencies while complying with all regulatory requirements could hinder profitable trading opportunities. There is a risk that a single trader or a group of traders could act outside of our delegations and controls, leading to regulatory intervention and resulting in financial loss and potentially damaging our reputation. See Financial statements - Note 28. Reporting - failure to accurately report our data could lead to regulatory action, legal liability and reputational damage. External reporting of financial and non-financial data, including reserves estimates, relies on the integrity of systems and people. Failure to report data accurately and in compliance with applicable standards could result in regulatory action, legal liability and damage to our reputation. Gulf of Mexico oil spill There continues to be uncertainty regarding the extent and timing of the remaining costs and liabilities relating to the Gulf of Mexico oil spill not covered by the proposed Consent Decree and the Settlement Agreement. The proposed Consent Decree between the United States, the five Gulf Coast states and BP and the Settlement Agreement between BP and the Gulf Coast states will, subject to these becoming effective, settle all federal and state claims arising from the 2010 Gulf of Mexico oil spill. The proposed Consent Decree and the Settlement Agreement are conditional upon each other and neither will become effective until there is final approval of the Consent Decree. There continues to be uncertainty regarding the extent and timing of the remaining costs and liabilities relating to the Gulf of Mexico oil spill not covered by the proposed Consent Decree and the Settlement Agreement. For items not covered by the proposed Consent Decree and the Settlement Agreement and for further information, see Financial statements - Note 2 and Legal proceedings (page 237)